European banking stocks could sink another 5 or 6 percent in a sharp selloff that would unsettle the broader market, Geoff Wilkinson, head of investment research at Mint Equities, told CNBC.
“People are taking some money off the table in this very, very important sector. On that basis I think we need to switch to a sell on rallies in this sector and potentially look for further downside,” Wilkinson said.
The broad stock market rally over recent weeks has been dominated by rising bank stocks, Wilkinson pointed out. But volatility has started to creep in during the last couple of sessions and European banking stocks have finally broken down through their six to seven week uptrend, he said.
“We have the potential to come down probably another 5 or 6 percent quite quickly from here … If the banks suddenly miss a step here then I think that’s potentially quite important for the broader index,” Wilkinson said.
Investors should use the opportunity to close out long positions and potentially go short, he said.
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