I expect NYCB to hold its rising intermediate trading channel, and to challenge and break its declining short-term trading channel. I expect this to resolve in the coming week, and if it indeed resolves as I anticipate, I intend to initiate a long position.
My interpretation of US equities markets is that, following a euphoric July, market participants got increasingly cautious in August, due to bad economic news from China and stretched valuations of the tech-heavy US indexes. Banks were disproportionately affected, as rising inflation expectations raised the possibility of further Fed rate hikes, more losses on held-to-maturity loan books, and an increasing probability of a US recession, leading to higher defaults, greater losses and potentially another run on deposits.
While I think these risks are certainly real, I don't expect them to fully manifest. I think that the present weakness in bank stocks is a case of recency bias, i.e. investors skating to where the puck was in March, instead of where it will be December. NYCB's management has taken aggressive action during the past 6 months to expand their franchise, by buying Signature Bank of NY at distressed price from the FDIC, and hiring teams of high-net-worth advisors that were dislodged by the collapse of First Republic Bank. In the aftermath of past bank crises, such moves have often proven to be excellent opportunities for shareholder value generation, and I don't see a reason why this time should be different.
This idea would be invalidated if the double bottom pattern gets broken, or if the stock closes below the rising intermediate channel. My PT1 is at 12.35, but I would likely only take partial profit there.
My interpretation of US equities markets is that, following a euphoric July, market participants got increasingly cautious in August, due to bad economic news from China and stretched valuations of the tech-heavy US indexes. Banks were disproportionately affected, as rising inflation expectations raised the possibility of further Fed rate hikes, more losses on held-to-maturity loan books, and an increasing probability of a US recession, leading to higher defaults, greater losses and potentially another run on deposits.
While I think these risks are certainly real, I don't expect them to fully manifest. I think that the present weakness in bank stocks is a case of recency bias, i.e. investors skating to where the puck was in March, instead of where it will be December. NYCB's management has taken aggressive action during the past 6 months to expand their franchise, by buying Signature Bank of NY at distressed price from the FDIC, and hiring teams of high-net-worth advisors that were dislodged by the collapse of First Republic Bank. In the aftermath of past bank crises, such moves have often proven to be excellent opportunities for shareholder value generation, and I don't see a reason why this time should be different.
This idea would be invalidated if the double bottom pattern gets broken, or if the stock closes below the rising intermediate channel. My PT1 is at 12.35, but I would likely only take partial profit there.
Trade active:
I'm long now.
Trade active:
Starting to work.
Trade closed: target reached:
The original PT is reached. For anyone intending to remain long, potential next targets might be the upper end of the gap that opened on August 15, at 12.52, T2 of the double bottom pattern at 12.69, or the VWAP since the July 28 high, which is currently at 12.76. I will stay in the trade, and decide over the weekend, where I will set my next PT. SL will be pulled up to break-even.
Comment:
I'll raise my PT to 12.65. SL at the entry.
Trade closed: stop reached:
I should have stuck to my original plan. After reaching the T1 of the double top there was nothing left in the tank, and NYCB started to fall apart. It's now dropping out of the intermediate term bullish trend on the original chart. Out for the loss.