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Do you remember that old advertising slogan from the late ‘60s and early ‘70s used by an Australian Bank? The actual words were: “Get with the Strength, Bank Commonwealth.” I’m not interested where you do your banking but as far as stock price goes, the Australian Banks have all made strong moves over the past couple of months and Commonwealth is leading the way. You can see from Chart 1 that CBA is the only one of the Big Four Banks to have exceeded its 2011 top, which last week was looking like a potential double top.
Chart 1: Australian ‘Big Four’ Banks Showing Rising Prices
click to enlarge
In contrast to the relatively even market performances of the Australian Banks is the diversity in position and recent movement of the US Banks. (I use the term ‘Bank’ loosely here as I have included some financial stocks in the mix). Let’s take a look at some of the ones I watch regularly.
Wells Fargo (NYSE:WFC) hasn’t had the run down from the triple top we might have expected and is now poised for a potential break of this level at a fourth attempt, as shown in Chart 2. W.D. Gann tells us that a market will often break through on the fourth attempt, so it could pay to watch this one closely over the next few days and weeks. One entry we could plan for is a swing bottom above the level of the highs.
Chart 2: Wells Fargo with Fourth Attempt at Price Resistance
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Bank of America (NYSE:BAC), though widely traded, is at very low price levels compared with its pre-GFC price. This is a stock that appears to bounce off 50% levels and it spent most of 2010 and 2011 trending down strongly in repeating ranges. At present that trend has stalled and BAC seems to be held up by resistance around the $7.00 mark.
Bank of New York Mellon (NYSE:BK) is also at low levels compared to its pre-GFC price and appears (much like BAC) to have stalled in its trending movement, as illustrated in Chart 3. The lower tops and higher bottoms on the monthly chart indicate uncertainty and a break out of the contracting ranges could determine a future direction.
Chart 3: Bank of New York Mellon with Triangle Forming
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Stocks that move in strong trends are better trading prospects but they each require individual analysis and back-testing to ascertain the best way to trade them. I will be discussing how to choose a bank stock to trade in my Trading the Banking Sector webinar on Saturday, August 25th. I will analyse the critical distinctions between trading Australian and US bank stocks, including the key differences such as 1-day and 2-day swing trading, identifying trends, back-testing and creating a trading plan. I would love you to join me!
It’s the Journey
Lauren Jones
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