Swiss Banks Retreat Ahead of Earnings This Week
With traders beginning to take profits in high-flying financials from Bank of America (NYSE: BAC) to Wells Fargo (NYSE: WFC), should we expect a similar sell-the-news reaction with UBS (NYSE: UBS) reports quarterly earnings on Tuesday?
Like most banks, UBS has been moving strongly higher in recent days and weeks. From its last significant pullback at the beginning of January – a sell-off that took the stock lower for four days in a row – shares of UBS have gained 28%. This includes the stock’s pullback on Monday, during which UBS sold-off by two percent.
So profit-taking after a major run like that should be of little surprise. And it also should not surprise traders if profit-taking in UBS continues regardless of what is said during the company’s Tuesday earnings report. Whether good news becomes an occasion to lock in gains – as traders were doing on Monday – or bad news becomes an impetus to sell, the fact that UBS was only recently trading with “consider avoiding” ratings of 3 out of 10 suggests that traders who are looking for a bank will buy may find UBS available at lower levels in the near term.
Speaking of European-based banks reporting earnings this week, Credit Suisse Group (NYSE: CS) is scheduled to make its quarterly statement on Thursday. Like UBS, shares of CS have been trading in bear market territory for the past several months, with Credit Suisse slipping below its 200-day moving average in the spring of 2011.
Up nearly 30% from its 52-week lows set in November, CS pulled back by well over one and a half percent in Monday’s session. Traders sold the stock aggressively in the wake of Credit Suisse’s recent four-day rally, an advance that took CS into technically overbought territory on Friday. Despite the pullback on Monday, shares of CS still have a negative edge of more than half a percent in the short-term.
One bank from Europe that traders might be equally interested in is Barclays Plc ADRS (NYSE: BCS). Barclays has rallied back into bull market territory over the past several days and, in selling off by more than 2% on Monday, could be at the beginning of its first significant pullback above the 200-day moving average in nearly a year.
Shares of BCS began trading on Monday with a “consider avoiding” rating of 2 out of 10. But selling in the stock already has resulted in a two-point ratings upgrade. Should BCS continue to pull back, traders should expect further upgrades and in all likelihood, significant, short-term positive edges, as well.
Be sure to read our latest column from 7 Stocks You Need to Know: “The Intel Pullback as Pitstop: Three Down, Six Up“.
David Penn is Editor in Chief of TradingMarkets.com.