Keycorp, Suntrust and the Move Back to the Banks

Late strength helped keep a number of regional banks from finishing in oversold territory on Friday. But if buyers don’t stick around when the new week begins, many of these bank stocks could be back on their way lower.

Shares of Keycorp (NYSE: KEY) closed lower for two days in a row after easing toward technically oversold levels ahead of the final trading day of the week. The pullback in KEY has earned the bank a one-point, ratings upgrade to 7 out of 10, just shy of “consider buying” territory, and a positive edge in the short-term of more than one percent.

The last multi-day pullback in Keycorp, at the beginning of March, was the prelude to a rally of more than 13%, as KEY closed higher for nine out of the next ten trading days.

Keycorp has been trading above its 200-day moving average since the second half of December. After settling into a trading range in mid-January, KEY broke out above this range two months later to reach new, six-month highs. The current pullback in the stock comes as traders and more active investors take profits from those gains.

Also pulling back from significant, long-term highs are shares of Fifth Third Bancorp (NASDAQ: FITB). FITB had closed lower for two days in a row heading into Friday’s session, and a bounce of a third of a percent appears to have been all that stood in the way of a return trip to oversold territory for the stock.

FITB earned a one-point, ratings upgrade early in Friday’s session, but lost that upgrade heading into the close. As such, FITB will take neutral ratings of 7 out of 10 into trading Monday morning. and is set to take “consider buying” ratings of 8 out of 10 into trading Monday morning. The positive edge in the stock is just under three quarters of a percent.

Similarly showing strength midway through trading on Friday – though still likely to finish technically oversold – are shares of Suntrust Banks (NYSE: STI). Crossing into bull market territory at the beginning of February, shares of Suntrust are pulling back for the second time since crossing above its 200-day moving average. The first instance, shortly after the beginning of the month, featured a gain of more than 13% as STI closed higher for six out of seven trading days.

For traders looking to avoid single stock risk, exchange-traded funds representing bank stocks include the Financial Select Sector SPDRS ETF (NYSE: XLF) and the 2-to-1 leveraged ProShares Ultra Financials ETF (NYSE: UYG). Note here however that weakness is not nearly as widespread, with both XLF and UYG returning to neutral territory midway through trading on Friday after closing lower for the previous two sessions. To this end, the KBW Regional Banking SPDRS ETF (NYSE: KRE) may be more worth a look. KRE has closed lower for three out of four days in a row above the 200-day moving average, ending oversold on Thursday and just outside of oversold territory on Friday.

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