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| Symbol | Sector | Return | Exposure | Trades | Last Trade | Status |
|---|---|---|---|---|---|---|
| WFC | Banks | -15.44% | n/a | 8 | 07-Jan-10 | Prior Holding |
04-May-09
Overbought, with Bullish Sentiment High
Holding Rationale for WFC.
Looking at yesterday's watchlist of long picks, there were some big moves today. Unfortunately, many gapped up significantly at the open, so entries were a bit difficult to find. Whereas yesterday I was remarking on the number of good long setups, today most of these same charts appear extended.
Financials rallied over 10% on news that several of the largest banks will need to raise capital following the self-administered, moderately stressful test they took. I imagine that investors are thinking that the stress test results will provide clarity and a path forward for the banks, with the government committed to nurturing them back to health. Warren Buffett also helped things with his positive comments on WFC. Looking at the chart of XLF, price broke above some resistance on slightly increased volume.
Considering one of the banks in question, BAC, I am wondering how a bank with a (possibly inflated) market cap of $66 billion raises $10 billion in capital in a way that somehow benefits shareholders. I've been trying to understand this "raising capital" process better, so if anyone has an explanation or link to resources, please use the comments section.
Looking at the chart for BAC, we can see price breaking out of a wedge on high volume. Looks bullish to me.
Looking at the Bullish Percent Index, we see it closed at 70.00 today, with the 52 week high at 72.00. So we are overbought in the short- and intermediate-term, with sentiment at a bullish extreme. 
I have a long list of stocks I would like to buy on a pullback, but not so much that looks good for tomorrow. I am continuing to hold a number of short positions, but will refrain from adding more until index charts start breaking out of their rising trends. In other words, tomorrow is likely to be a light trading day.
Posted at 07:57 in Holding Rationales | Permalink | Top
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