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Money Center Banks To Sell: Citibank And Wells Fargo

Paul Franke profile picture
Paul Franke


  • Citibank and Wells Fargo have turned into chronic underperformers.
  • April's momentum indicators do not show much positive change for investors.
  • A retest of the March lows may be next. Plus, a sluggish reopening of the U.S. economy during the summer could be problematic for bank values.

I wrote a bullish note about a month ago on the three large banks with the best technical trading patterns. This article will highlight the weakest two of the big money center banks in America, namely Citibank (C) and Wells Fargo (WFC). I will focus my discussion on the subpar momentum trends of the two versus the blue-chip choices in the banking industry. An old Wall Street adage popularized by Ben Graham in the 1940s says, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” Well, both the voting and weighing machines argue investors avoid these two banks, in favor of better positioned companies.

For starters, the two banks have lagged rather badly for years, in terms of stock performance for investors. Below are price charts from periods of three months to five years against the main diversified Financial Sector SPDR ETF (XLF), and leading competitors JPMorgan Chase (JPM), Bank of America (BAC) and Goldman Sachs (GS). Had you invested $10,000 in each, Citibank and Wells Fargo would have finished at the back of the pack.

April’s Weak Technical Momentum

Citibank and Wells Fargo have recovered nicely in price from their March lows. However, the bounce appears more a function of following the market, as opposed to a result of serious investor interest. Below I am charting some of my favorite momentum indicators for each on a 12-month scale.

I have circled in green the Relative Strength Index (RSI) has worked off the clearly oversold levels of March. Today’s reading around 50 indicates a normal momentum setting shorter term. The two have witnessed a sharp drop in the Negative Volume Index (NVI) during March-April, marked with red arrows. Despite the price upmove generally over the same span, a downtrending NVI

This article was written by

Paul Franke profile picture
Nationally ranked stock picker for 30 years. Victory Formation and Bottom Fishing Club quant-sort pioneer.....Paul Franke is a private investor and speculator with 36 years of trading experience. Mr. Franke was Editor and Publisher of the Maverick Investor® newsletter during the 1990s, widely quoted by CNBC®, Barron’s®, the Washington Post® and Investor’s Business Daily®. Paul was consistently ranked among top investment advisors nationally for stock market and commodity macro views by Timer Digest® during the 1990s. Mr. Franke was ranked #1 in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of 60,000+ portfolios. Mr. Franke was Director of Research at Quantemonics Investing® from 2010-13, running several model portfolios on the Covestor.com mirror platform (including the least volatile, lowest beta, fully-invested equity portfolio on the site). As of April 2023, he was ranked in the Top 5% of bloggers by TipRanks® for stock picking performance on positions held one year. A contrarian stock picking style, along with daily algorithm analysis of fundamental and technical data have been developed into a system for finding stocks, named the “Victory Formation.” Supply/demand imbalances signaled by specific stock price and volume movements are a critical part of this formula for success. Mr. Franke suggests investors use 10% or 20% stop-loss levels on individual choices and a diversified approach of owning at least 50 well positioned favorites to achieve regular stock market outperformance. The short sale of securities in overvalued, weak momentum stocks as pair trades and hedges is also a part of the Victory Formation long/short portfolio design. "Bottom Fishing Club" articles focus on deep-value candidates or stocks experiencing a major reversal in technical momentum to the upside. "Volume Breakout Report" articles discuss positive trend changes backed by strong price and volume trading action.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in C, WFC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only. All opinions expressed herein are not investment recommendations, and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisor capacity and is not a registered investment advisor. The author recommends investors consult a qualified investment advisor before making any trade. This article is not an investment research report, but an opinion written at a point in time. The author's opinions expressed herein address only a small cross-section of data related to an investment in securities mentioned. Any analysis presented is based on incomplete information, and is limited in scope and accuracy. The information and data in this article are obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed. Any and all opinions, estimates, and conclusions are based on the author's best judgment at the time of publication, and are subject to change without notice. Past performance is no guarantee of future returns.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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