The Hot List: 3 Financial Stocks for Short Term Traders
With selling in financial stocks weighing down the S&P 500 on the first trading day of the week, are banking shares nearing levels where buyers historically have been tempted to enter the market?
Most of the financial stocks are in their own private world of hurt. Trading in bear market territory for months, many of the big name financials have made short term gains only to see sellers and short sellers swoop in to overwhelm the market with supply and send share prices lower again.
Heading into Tuesday’s trading, there are a handful of financial stocks that have been sold along with the rest of their cohort, but are trading above their 200-day moving averages, where pullbacks have more often been met by strong buying. Among these stocks are a number of REIT-related stocks like Simon Property Group (SPG) and Public Storage (PSA). Both of these stocks pulled back on Monday, yet neither have retreated to technically oversold territory.
That said, some of the more interesting stocks from the financial sector that have begun to experience the first signs of selling are in the consumer credit area. A number of these stocks have also recently climbed to their highest levels in a year and may be especially vulnerable to profit-taking as volatility begins to pick up in the broader market.
Down for three out of the past four trading days, for example, shares of American Express (AXP) pulled back by well over 1% in Monday’s session. The stock has a very modest positive edge, but will require additional selling before trading in oversold territory. Note that AXP was trading in oversold territory as recently as last week, finishing oversold for two consecutive sessions.
Visa (V) pulled back by more than 1% on Monday, as well. The stock is only recently off 52-week highs and traders should not be surprised if the selling on Monday turns out to be a prelude to greater profit-taking in the first half of the week. Last rallying to new, 52-week highs in late October, V dropped by more than 4.5% in two days.
Shares of Mastercard (M) also traded at 52-week highs intraday on Monday only to finish lower. As with Visa, traders should be wary of further selling as these stocks continue to trade at their highest levels in a year.
The edges in Visa and Mastercard are small but positive heading into trading on Tuesday. Traders looking to take positions in stocks with significant financial exposure, but unwilling to take the risk of buying a bank that has been trading in bear market territory since before the middle of the year, may want to keep credit card stocks like these in mind.
All of the stocks in today’s report were available from research and data available through The Machine. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com