Skip NavigationMarketsBusinessInvestingTechPoliticsVideoWatchlistInvesting Club
PRO
LivestreamMenuThe regional banking sector is the largest subset of the financial sector. There are 160 names in the State Street SPDR S & P Regional Bank ETF (KRE) alone. If you want a huge basket of stocks, then that’s where you look. To me – it’s way too diverse. I prefer the iShares U.S. Regional Banking ETF (IAT) as it focuses on the key individual names within the sector. Both ETF’s are breaking out and look great. In fact, the tide is lifting most boats within this vast ocean of stocks, but I tend to focus on the leaders. Names like PNC , Citizens , Truist , Regions and U.S. Bancorp all look great from a technical perspective. However, there is one that has jumped off the charts to me lately that deserves more attention – Fifth Third Bancorp . The Cincinnati-based regional bank has quietly become one of the stronger performers in the space. Their biggest catalyst came earlier this year with its transformational acquisition of Comerica. The nearly $11 billion transaction closed in February creating the nation’s ninth-largest bank. Shares have pushed higher following the completion of that acquisition and have given us a great risk/reward set up technically. Let’s break it down. The setup – near term When looking at recent price action on a one-year daily chart, there are several things that pop out. After selling off in March, the stock was able to test and recapture its 200-day moving average. It then consolidated in a narrowing range and broke higher. That gave us upside targets back to its 52-week highs. Once achieving that target, shares were able to break out to new highs above a major resistance level in the $54/$55 range. That level should now act as support and provide a manageable downside risk area for those looking for a quick trade. If this area doesn’t hold, we may see shares trade to $50/$52, maintaining its longer-term uptrend but not giving us that quick reward. For the patient investor, this gives you a more ideal entry point and a better level to protect yourself. That’s why we look at charts on multiple time frames. The setup – long term The weekly chart shows us the significance of this recent move. We have seen price reach multiyear highs after basing for years. While the near-term volatility may cause some anxiety, the long-term trend truly sets us up nicely when managing risk. Here you see not only the 52-week breakout, but its significance over time. Will this be the time for shares to make a more aggressive move higher? Quite possibly. If it doesn’t, we know our new support zones and trendline. Momentum is also trending higher and has never gotten to extreme levels as shown in its RSI. Lastly, on a relative basis compared to the IAT, Fifth Third Bancorp is consistently outperforming the key benchmark. The trade This is one of those rare setups where we can argue to buy now and buy later. Near-term, we hope to capture recent momentum for a quick pop. If shares fail to make a strong upward move immediately, the positive momentum and levels of support are there to guide us patiently over the coming months. Over the short term, the stock looks poised to move into the low $60’s based on this recent breakout. Over the longer time horizon, we get targets of $68-$72. First, using Fibonacci extensions from the 2023 lows to the 2025 breakout gives us an upside to $68.50. The other target of $72 derives from calculating the lows from 2023 to the breakout in 2025. That range of $22 to $47 is added to the breakout on a weekly basis and brings us to a $72 target. Buying banks at the highs may feel uncomfortable, but the strongest stocks tend to become stronger for a reason. For now, Fifth Third appears to be transitioning from a regional banking story into a national growth story, and the charts suggest investors are beginning to recognize that reality. Jay Woods, CMT with Chase Games DISCLOSURES: None All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.Read More
About The Author
