Market Overview

Are Big Banks A Buy Before Earnings Season?

Are Big Banks A Buy Before Earnings Season?

Earnings season for big banks kicks off next week, with Citigroup Inc (NYSE: C) scheduled to report Monday followed by heavyweights JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co (NYSE: WFC) on Tuesday. Should investors be buyers ahead of earnings season? Two experts have mixed views.

'Very Cautious'

Taking a look at the chart for the financial sector ETF, the Financial Select Sector SPDR Fund (NYSE: XLF), investors should be "very cautious" heading into next week's busy earnings season, Blue Line Futures President Bill Baruch said during a recent CNBC "Trading Nation" segment.

The chart is showing "a lot of overhead resistance" around the $25 level, and recent weakness has the ETF gravitating closer to the 50-day moving average, he said. 

Also important to consider: bank stocks have in the past reported "solid" earnings,  only for the stocks to show a "knee-jerk reaction," Baruch said. 

Despite a "lot of resistance" in the financial sector ETF, investors can take advantage of a "a great buy for the long term" if shares dip below key resistance levels, he said. 

'Certainly Bullish'

Stacey Gilbert, head of derivative strategy at Susquehanna Financial Group, took the other side of the debate and said activity in the option market is "certainly bullish." Upside call buyers are building positions through call spreads, she said. 

Related Links:

Big Bank Q3 Earnings Roundup

2 Pros Debate: What's Next For Bank Stocks?

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