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Sunday
Aug092009
Overbought Banks Worth a Punt
Chart courtesy of Stockcharts
Taking a quick look outside of the precious metals box we came across a couple of banks that look a tad overbought at the moment and just might be worthy of the purchase of a few PUT contracts. The Bank of America (BAC) and the US Bancorp (USB) have charts that suggest they are near to or have indeed peaked.
In the last month BAC has ran up from $12.00 to $17.00 for a gain of almost 50%. A terrific run by USB could now tempt the profit takers to take some of their cash off the table. In both cases the technical indicators suggest that these stocks are overbought and ripe for a pullback.
As fans of the precious metals sector this is not our neck of the woods and who knows just how much more money could be made available by Uncle Sam should they need it. However a pull back at this stage would be reasonable as these stocks take a breather.
This is not a trade we would hit hard but more of a short term punt as the upside appears limited and the downside looks more of a probable move at the moment.
We may buy a few contracts today but have yet to decide which series or indeed what strike price to use as vehicle for this trade.
Your thoughts are of course most welcome.
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Reader Comments (2)
EXCELLENT!..............You may deal with precious metals, but it is always nice to be in a position to short your mortal enemy. After all, they have no hesitation to short your precious metal world.
AYZ,
Your comment gave us a laugh this morning we didn't see it as 'shorting the enemy' but thats bang on, anyway we bought a few PUTs – so will post shortly.