Has The Financial Sector Suffered Enough?
Published January 9th, 2008 in Technical Analysis Tags: banks, bkx, brokers, bullish percent, bullish percent chart, financial sector, inflection point, market bottom, oversold, XBD.Financial stocks have been the favorite punching bag of the shorts. And no expletive does the price action justice, especially if you’ve been long any of them as I have.
The problem is that no level of oversold seems to bring in enough strong hands to give it a reprieve. It seems that ever little bounce is just another chance for the shorts to pile on.
Things have gotten so bad that only 15.22% of the stocks in the sector have buy formations according to point and figure charting (as of yesterday’s close). To find things in similar disarray, we’d have to go back to early 2000 (14%) and late 1998 (11%).
Obviously, both of those were great buy points.
What gives more impetus to the argument now is that the banks and brokers are not the only stocks that are extremely oversold according to (bullish percent charts). Pretty much everything is - with the exception of energy. In fact, the last time the bullish percent indices for this many sectors were collectively this low was in mid August 2007.
For more information, follow this link to see how I use bullish percent charts to time the market.
banks, bkx, brokers, bullish percent, bullish percent chart, financial sector, inflection point, market bottom, oversold, XBD
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6 Responses to “Has The Financial Sector Suffered Enough?”
- 1 Pingback on Jan 24th, 2008 at 2:49 am
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Thank you for sharing your fine work with the public. Your blog has quickly become one of my favorites.
With respect to the bullish percents, note that yesterday, the $BPNYA fell below 30 for the first time in more than five years. We are now entering a low-risk buy area. Almost everyone who wants to sell has already sold. Once the $BPNYA starts moving up above 30, it will be a good time to aggressively buy stocks.
This might help:
Countrywide climbed the most since at least 1982. Bank of America Corp. is in talks to acquire the largest U.S. mortgage company, a person with knowledge of the discussions said.
[…]
The possibility Countrywide will be bought “suggests a bottom in financial shares,'’ said Michelle Clayman, the New York-based chief investment officer at New Amsterdam Partners, which manages $4.5 billion. “It says there is some value for these companies and at the right prices people will come in and prop them up.'’
Of course, I post that and today, the sector is getting hammered because the Conutrywide sale is weak and Merrill Lynch misplaces 15 billion or so. Heh.
Well, at least we can’t say it is boring.
Nueoff, that’s the classic use of BP charts. I tend to get in early by partial entry before it goes back up above 30%.