A Trendy Stock Charts member requested last week that I take another look at some bank stocks. The member also requested that I pick my favorite bank stock of the group.

At first, I was not aware of the monumental task I created for myself. I figured that the pool of bank stocks for my favorite bank stock selection would include all banks I have written about in the last year. Those banks include Bank of America (BAC), Citigroup (C), the Financial Select Sector SPDR ETF (XLF), Goldman Sachs Group (GS), JP Morgan Chase (JPM) and US Bancorp (USB).

While there are a couple of new stocks to look at for long-term trends, I also provided my long-term outlook for a couple of the stocks in this previous update:

“Long-Term Trend Review for BAC, C & JPM”

Not all the above stocks were reviewed in that update though. I will re-analyze those 3 stocks in the long-term trend review as well to see if any revisions to their analysis are necessary.

In order to pick my favorite bank stock, I will need to look at some long-term charts. The charts of choice will be 5, 10 & 20 year candlestick charts. First I will need to calculate some bullish price objectives. I will do that with Fibonacci Extension Tools, Retracement Tools and trendlines. Then I can decide which of the banks that I reviewed is my favorite bank stock.

Bank of America (BAC)

This first chart is for Bank of America (BAC). If BAC’s share price is going to try its hand at a full retracement of its downtrend, its share price should break above the black 61.8% Retracement Line during the current uptrend and then use that line as a consolidation area.

The current upside price target that seems most probable is the $35 price level. Considering that BAC’s share price is just shy of $25 at the moment, that seems like a nice possible gain over the next year.

The chance of a full retracement of its downtrend is a possibility. But as I mentioned above, the next uptrend should end slightly above the black 61.8% Retracement Line. The black 61.8% Retracement Line corresponds with the Golden Ratio for BAC’s current uptrend. The Golden Ratio is calculated by the 161.8% Target Line from the green Fibonacci Extension Tool.

If you are unfamiliar with the main uses for each tool, you may want to review the web pages for the charting tools again.

If BAC’s share price reaches[s2If !current_user_can(access_s2member_level1)]……

If you want to continue reading this article for Bank of America (BAC), Citigroup (C), Goldman Sachs Group (GS), JP Morgan Chase (JPM), US Bancorp (USB) & the Financial Select Sector SPDR ETF (XLF), you must first login.

I calculate upside price targets for each bank listed. I then pick my favorite based on the charts.

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)] the $35 price objective as anticipated, at that time it will be better to then review the likelihood of a $45 – $55 price target can be determined after the next leg up for BAC’s share price.

Citigroup (C)

In a January 2017 article for Citigroup (C), I stated the following:

An initial scale-in purchase below $55 and closer to $50 is an excellent opportunity to get long on this company.

The lower gray shaded box on this 5 year monthly candlestick chart for Citigroup was the area I identified in that January article as a good buy-in opportunity. While I look at some medium-term price objectives on this chart, I review longer-term price objectives in the January article. Those price objectives are still the same.

“1/31/2017 – Citigroup (C) Stock Chart Review”

The upper gray shaded box represents the probable ending point for Wave 5 of the Bullish Impulse wave pattern that I see in process. That could be as soon as the $73 level and up to the $82 price level. It’s going to take a lot of buying volume short-term to break through the 261.8% Target Line.

If the wave labeling is accurate, then bank stocks may be entering into a longer consolidation period at the end of Wave 5. Its share price will be consolidating an approximate 2 year uptrend at that point. That could be a 6 month to a 1 year consolidation. After the consolidation though, the expectation would be the start of another Bullish Impulse wave pattern that builds off the first one.

Since most bank stocks move together, could C’s charts be foreshadowing an upcoming correction? It could be, and that is why I tempered my expectations for bank returns in my long-term trend review.

Financial Select Sector SPDR ETF (XLF)

The next chart is a 20 year monthly candlestick chart for the Financial Select Sector SPDR ETF (XLF). XLF’s current long-term uptrend corresponds with the end of the bear market back in March 2009.

XLF consolidated above the 50% Retracement Line from the black Fibonacci Retracement Tool. That usually indicates a full retracement (100% retracement).

Purchasing a stock that is extended from a main supporting trendline takes on some additional risk. If you do purchase bank stocks now, make sure to always save cash for a second scale-in purchase in case of a pullback. That is a general rule when making aggressive purchases.

The 261.8% Target Line from the green Fibonacci Extension Tool represents the upper price range for XLF’s share price.

Goldman Sachs Group (GS)

This next chart is a 20 year monthly candlestick chart for Goldman Sachs Group (GS). I’ve only written one article for this investment bank, and it can be accessed here:

“12/17/2016 – Goldman Sachs Group (GS)”

The Golden Ratio for Goldman Sachs sits at the $355.82 price level, a gain of approximately 50% from current share prices. The journey to a stocks Golden Ratio typically unfolds in 3 legs upwards (waves 1, 3 and 5 of a Bullish Impulse wave pattern). The first leg up appears over.

Confirmation that the first leg up is over and the second leg up has begun will only be made when GS’s share price breaks above its previous high of $255.15; time to get long and re-analyze the breakout as its share price approaches that previous high.

JP Morgan Chase (JPM)

This next chart is a 10 year monthly candlestick chart for JP Morgan Chase (JPM). There is nothing I see in its chart that I want to change in my previous 2 analysis. I did have one more update for JPM after its long-term trend review – it mentioned a $121 price target.

“7/31/2017 – A $121 Price Target for JP Morgan (JPM)”

After spending some time consolidating around the 100% Target Line from the black Fibonacci Extension Tool, JPM’s share price appears poised to continue its ascent towards its Golden Ratio, or the 161.8% Target Line. Shorter-term, JPM could see a little resistance around the $110 area.

I would refer to JPM’s specific article for additional details of that price target.

US Bancorp (USB)

This is a 20 year monthly candlestick chart for US Bancorp (USB). The Elliott Wave breakdown on this chart is very similar to other bank stocks. For USB’s share price to proceed higher, it is going to need strong buying volume around its previous high from earlier this year.

The green Fibonacci Extension Tool overlaid on the last year shows the current uptrend will see resistance around the $56.25 price level. The resistance will be from $56.25 up to its previous high at $56.61. If there is any break above the resistance level on heavy buying volume, continue holding your long-term shares and trade the continued breakout.

If USB did complete its 5 waves up and is consolidating, it will wither not break above its previous high during the current uptrend or it will break above and then start to pull back sharply. Monitoring USB’s share price at its previous high is necessary as a share holder.

My Favorite Bank Stock – Summary

So which of the banks is my favorite bank stock? I am probably leaning towards either Goldman Sachs Group (GS) or JP Morgan Chase (JPM). I like the idea of making new all-time highs while reaching for a Golden Ratio price target. I prefer that over the bank stocks that are trying to retrace where its share price has already been. I am not poo-pooing the retracement method as I use it frequently when trying to establish price targets. But if I had to choose, and I do, I will take the new all-time high targets for GS or JPM.

But sometimes when a sector is hot, just purchasing shares of its index can be very rewarding. In the near future, I anticipate writing a more in-depth article on the XLF – that should provide deeper insight as to the bearish and bullish possibilities that could be developing for bank stocks. For now though, stay long and bullish on all the bank stocks and the sector.

If I did not review your favorite bank stock, drop me a request and I will analyze it.

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