4/19/2017 – US Bancorp (USB) Stock Chart Review
US Bancorp (USB) Stock Chart Review
This next update is for US Bancorp (USB), as requested through email from a trial member. Trial members get the benefit of a free request or two, depending upon the number of open requests at the time.
Since the banking sector has been under pressure recently, it's probably a good time to see if the charts for US Bancorp (USB) can provide any insights to the industry as a whole. As I have mentioned in the past, most bank stocks tend to look eerily similar to each other.
US Bancorp (USB) just reported earnings this morning. We also have the benefit of the first bank reporting earnings last week, JP Morgan (JPM). JP Morgan (JPM) reported favorable results yesterday but still ended the day lower than the previous day's close.
One thing to remember though, a stock's initial move after earnings is usually not the right one for the longer-term. That is the general rule and of course there are exceptions.
Let's see if JPM's good earnings report from last week can be extrapolated to USB's charts for any correlations in price activity.
USB - 20 Year Monthly Candlestick Chart
This first chart is a 20 year chart since US Bancorp is a new covered stock for me. I like to start big and see where a stock has been in the past. Those who do not study history are doomed to repeat it. That can be a good or a bad thing. Let's see what USB's history tells us on this long-term chart.
US Bancorp (USB) reported earnings this morning. They beat on earnings according to Think or Swim but yet their stock price is falling after the earnings beat. This is similar price action to JPM's share price after it reported earnings.
One explanation, a long-term Bullish Impulse wave pattern jumped out at me on this monthly chart. It meets a lot of the characteristics of a Bullish Impulse wave pattern (please note, this is a members-only link - if you are not logged in, you will be re-directed to the subscribe page). Wave 3 is the longest wave; Waves 1 and 5 are identical in length, Wave 4 identified by the MACD Histogram sell-off, USB's share price reached the Golden Ratio of its uptrend (the 161.8% Target Line).....
From a long-term Elliott Wave perspective, the best entry to go long on USB's stock is between the $36.50 - $40.50 price level which is several months away. If USB did just complete a Bullish Impulse wave pattern that took 8 years to complete, the correction would involve a multi-year correction.
Before USB's share price reaches that lower level, it will most likely see a bounce from the $45 price level. This bounce should take USB's share price back towards its previous highs of $56. Its rebound towards that area is everything and will tell the story of USB's next several months to come.
Let's review some shorter-term charts and see if they provide for any shorter-term trade set-ups.
USB - Weekly Analysis
This is a 3 year weekly chart for US Bancorp. I placed a Fibonacci Retracement Tool on an identifiable Bullish Impulse wave pattern. These are the items to watch for in the coming weeks.
- Look for support most likely around either the 50% Retracement Line or the 61.8% Retracement Line
- If support is found in the $45.41 - $47.55 price area, an initial scale-in purchase can be made to go long
- Any break through the 50% Retracement Line on heavy selling volume, selling volume that is significantly higher than normal trading volume, is a very bearish sign
- The downtrend is most likely heading for the $40 price level before rebounding with any significance
With an earnings beat and based on the Elliott Wave structure on this weekly chart, USB's share price should most likely find support around either the 50% Retracement Line or the 61.8% Retracement Line in the next 2-3 weeks. Once the MACD Histogram on the weekly chart starts to indicate a slow-down in selling momentum, a trade opportunity to go long and play the rebound is at hand.
When a correction starts, Wave A of a corrective wave usually terminates around the bottom of Wave 4 in the Bullish Impulse wave pattern. That would mean that USB's share price should find support in the $47.55 - $49.68 price range, a range that USB's share price has entered this week with its earnings sell-off.
Any shares purchased for a potential rebound can be traded back up towards the $53 Wave B target area I identified above.
However, do make certain that some sort of other indicator points towards a reversal also. Because a break of the 50% Retracement Line with heavy volume and you could be stuck in the position possibly for a few months before getting a chance to break-even on the trade again.
US Bancorp (USB) Stock Chart Review Summary
Since the long-term outlook for US Bancorp (USB) does not look especially favorable, it's time to review the XLF charts soon. Could the banking sector be in store for a longer correction period than anticipated? If I were to make the judgement based on USB's stock charts, I would say yes. If that is the case, maybe the interest rate increases in 2017 are going to do nothing more than provide an opportunity to "sell the news".
In the meantime though, USB could be setting up for a rebound trade in the next couple of weeks. Watch the indicators on the weekly chart for signs of a reversal. Look to confirm the reversal on a daily chart or with another form of technical analysis. If nothing else, stop in the Idea Chamber and ask my opinion on whether or not a reversal seems to be taking place.
While it is possible that USB can breakout to new all-time highs during its rebound, that does not seem like the most likely scenario at this point. As USB's share price starts to rebound, additional analysis is probably necessary at that time to monitor the Wave B price target and determine if a new breakout is possible.
Good luck trading!
On deck: Microsoft (MSFT)
In the Hole: Johnson & Johnson