Selling in Regional Banks Puts Bulls on the Run

If you think that the sectors that led the market higher in January and February will be back in short order to lead the market higher over the balance of the year, then the pullbacks in regional banks like Keycorp (NYSE: KEY) and Suntrust Banks Inc. (NYSE: STI) may be worth a look.

Overall, regional banks have been among those sectors selling off aggressively heading into March. The KBW Regional Banking SPDR ETF (NYSE: KRE) has closed lower for two days in a row, both finishes in technically oversold territory, and is trading near its lowest levels in two weeks. The selling in KRE comes as profit-taking in the wake of the fund edging to new, 52-week highs in mid-February. KRE has finished down for seven out of the 10 days since those new highs were made.

Heading into trading on Tuesday, the KBW Regional Banking ETF has a neutral rating of 6 out of 10 after being rated as high as a 9 out of 10 intraday. KRE has a positive edge in the short-term of more than 1%.

The pullbacks in Keycorp and Suntrust Banks are representative of the selling taking place in individual stocks within the sector. KEY, with neutral ratings of 6 out of 10, but a short-term, positive edge of one and a half percent, has closed lower for four days in a row after dropping by more than 2% in Monday’s session.

KEY’s correction has taken the stock back into technically oversold territory, levels the stock has avoided for more than a month as buying pressure has meant relatively shallow dips in the stock since it climbed back above its 200-day moving average in the second half of December.

And only trading in bull market territory since early February, shares of Suntrust Banks slid by 3% ahead of trading on Tuesday in finishing lower for a third day out of the last four. Suntrust Banks has a positive edge of 1% in the short-term, and a 8 out of 10 rating which puts STI at the beginning of our “consider buying” designation. Any additional selling in the stock will take shares to new, two-week lows, deeper into technically oversold territory and, potentially to even higher ratings upgrades.

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David Penn is Editor in Chief of