BofA, Citi and the Return of Buying Banks

With both Bank of America (NYSE: BAC) and Citigroup (NYSE: C) crossing into bull market territory less than a month ago, it is hard not to begin thinking ahead to the possibility of being able to trade even these most beaten-down of bank stocks from the long side once again.

It’s worth some perspective: shares of Bank of America had been trading in bear market territory since April 2011, Citigroup shares since May. And for many traders this meant that the only edges in these stocks over time had been negative ones, consisting mostly of overbought rallies to be sold short.

But with these stocks joining many of the regional banks like Wells Fargo (NYSE: WFC) and US Bancorp (NYSE: USB) on the buying side of the 200-day moving average, short-term weakness in bank stocks could again become something for traders to pursue rather than something for traders and active investors to avoid.

Shares of Bank of America have not been oversold in nearly a month, which was also the last time the stock finished lower for more than two days in a row. Heading into trading on Monday, shares of BAC are down well over 1% in closing lower for two out of the past three sessions. The stock has a neutral rating of 6 out of 10, and a modest, positive edge in the short-term of just over half a percent.

Citigroup shares Bank of America’s neutral rating. And like BAC, the last pullback in the stock a few weeks ago took Citi briefly into bear market territory (and in the case of Citigroup, into technically oversold territory, as well) before the stock recovered, gaining more than 5% over the next three days.

What other financials should short-term traders keep an eye on over the next few days? Active investors may appreciate the higher ratings and significantly better edges in bank stocks like Susquehanna Bancshares (NASDAQ: SUSQ) and Comerica (NYSE: CMA). Both stocks have closed lower for three out of the past four trading days to finish just outside of technically oversold territory on Friday, and have earned 7 out of 10 ratings, putting them at the upper end of the “neutral” range. With SUSQ and CMA off more than 1%, Susquehanna has a positive edge of more than half a percent, while the positive edge in shares of Comerica is more than three-quarters of a percent.

Be sure to read our latest from 7 Stocks You Need to Know: “Buying the Selling in Weight Watchers”.

David Penn is Editor in Chief of