There’s no describing the glee in the voices of professional traders and professional market pundits alike on a day when the financial stocks help lead the stock market out of an early morning ditch of more than 100 points.
But before chasing some of these high-flying financials any higher, take a look at those trading in bull market territory first and then have the patience to wait for pullbacks.
Many of these bank stocks are trading at significant new highs for a second or third day in a row. Here are a few of the potentially most rewarding to watch.
Shares of Wells Fargo (NYSE: WFC) rallied to another new 20-day high on Thursday, gaining more than 1% and finishing higher for a third day in a row. The buying has created short-term overbought conditions in the stock, and a “consider avoiding” rating of 3 out of 10.
The last time WFC was as overbought as it is ahead of trading on Friday was in the first half of December. Then, a downgrade to 2 out of 10 set the stage for a drop in the stock that took Wells Fargo lower by more than 5% in six days.
Also up more than 1% and earning short-term, “consider avoiding” ratings is US Bancorp (NYSE: USB). Shares of USB have been trading above their 200-day moving average on a consistent basis since late November, and are overbought in the short-term ahead of trading on Friday.
With neutral ratings of 4 out of 10, USB could easily encourage profit-taking over the next few days. Including Thursday’s gains, shares of USB are up more than 9% from their last 10-day closing low in mid-December.
First Third Bancorp (NASDAQ: FITB) gained nearly 3% on Thursday and was among the best performing stocks in its sector. This rally has brought with it, however, a ratings downgrade to 3 out of 10, which puts the stock in the “consider avoiding” category in the short-term. For traders looking to buy stocks like FITB, shares are likely to be available at lower levels, as those currently long the stock take advantage of recent strength to sell their positions and lock in gains, potentially as early as Friday.
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David Penn is Editor in Chief of TradingMarkets.com.