Robert Sluymer, US Market Technical Strategist, discusses why he's bullish on JPMorgan Chase and Citigroup.
It's been a bumpy ride over the last few months for many bank stocks, JPMorgan Chase and Citigroup in particular. Yet, some investors are bullish on the sector and these two stocks, despite such things as the record $13 billion legal settlement between JPMorgan Chase and the US government.
While JPMorgan Chase is up 7% in the past six months, it occasionally dipped into negative territory. During that same time frame, Citigroup remained mostly in negative territory, and is currently down 1% since mid-May. Uncertainty about the Federal Reserve Bank's next move with regards to its "quantitative easing" program as well legal issues – particularly for JPMorgan Chase – helped make for a volatile couple of quarters.
That may all change for these two banks, according to Robert Sluymer, US Market Technical Strategist at RBC Capital Markets. His more recent study of the technicals for these two banks, as well as for a few others, is making him bullish on for them in the months ahead.
"From a technical standpoint, it looks to us that [Citigroup] – along with some other of the megacap financials – have effectively just consolidated, caught up to trend," says Sluymer. "We can use a trend indicator such as the 200-day moving average as a rough proxy. They've just caught up to that trend line and look like they're starting to turn here."
"What I think is so fascinating is what we're seeing on some of the other macro barometers like the yen, which has gone sideways for the same period," says Sluymer. "I think there's a bit of a global synchronization where some of these names and themes that have lagged are now starting to regenerate to the upside. And, I think there's a lot of opportunity here."
The charts for JPMorgan Chase offer a similar pattern to Citigroup. "It's caught up to trend," says Sluymer. "It's starting to turn."
Not only is Sluymer generally bullish on JPMorgan Chase and Citigroup, he is also generally bullish on other large stocks as well.
"This market has been so good at rotating to lagging themes to keep the general trend of the broader market up," says Sluymer. "I think these big cap names can soak up a lot of liquidity and I think they can support the market to go higher here."
However, Sluymer notes that Citigroup and JPMorgan Chase are lagging the rest of the financials. There's one particular part of the financial sector he recommends overweighting in a portfolio. To see which one that is – and to see Sluymer's charts – watch the video above.
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