Financials were on fire Monday, with the group leading the market higher. Should you add banks to your portfolio?
Fast trader Brian Kelly thinks you should but only if you’re nimble because going long banks now is a trade—not buy and hold investment.
However, if you are nimble, he points to a few catalysts that should buoy banks in the near-term.
- The mergers of two top banks in Greece should temporarily take stress off Europe banking system. ”To the extent that removes risk, it should be positive for European banks exposed to the risk,” says Kelly.
- BofA’s sale of its stake in CCB temporarily takes stress off US banking system. ”It may help JPM and WFC, believed to be counter-parties to that risk,” he says.
- Banks have been hardest hit, therefore they should snapback. In other words, banks were so badly oversold they should have additional upside.
However, Kelly again makes it clear that this is a trade only with a 1 to 3 week time horizon. “If the financials rally 5%, I’d take off half my position,” he counsels and reassess from there.
Trader Stephen Weiss is emphatic that Kelly’s thesis is only a short-term move. “I don’t think there’s enough stability in Europe to take the banks higher long-term,” he says. “I think Italy remains a threat.” He goes on to say if you must play the space, do it long JPMorgan, as a best of breed play.
Trader Steve Grasso is also very skeptical. He tells the desk his clients aren’t excited by the banks right now. “I certainly wouldn’t look for financials to lead the market for any length of time,” he says.
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Trader disclosure: On August 29, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karabell owns (AAPL); Karabell owns (BAC); Karabell owns (GS); Karabell owns (GOOG); Karabell owns (MON); Karabell owns (XRT); Weiss Owns (AAPL); Weiss Owns (AGU); Weiss Owns (JPM); Weiss Owns (QCOM); Weiss Owns (VZ); Weiss Owns (DE); Weiss Owns (NIHD); Weiss Owns (COP); Weiss Owns (DVN); Weiss Owns (TWM); Weiss Owns (SDS); Weiss Owns (AAPL); Weiss Owns (AGU); Weiss Owns (JPM); Weiss Owns (QCOM); Weiss Owns (VZ); Weiss Owns (DE); Weiss Owns (NIHD); Weiss Owns (COP); Weiss Owns (DVN); Weiss Owns (TWM); Weiss Owns (SDS)
For Zach Karabell
RiverTwice Capital owns (MON)
RiverTwice Capital is short (XLF)
For Carter Worth
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For Brian Kelly
Accounts managed by Brian Kelly Capital own
Accounts managed by Brian Kelly Capital own (MON)
Accounts managed by Brian Kelly Capital own (MOS)
Accounts managed by Brian Kelly Capital own (JJG)
Accounts managed by Brian Kelly Capital are long the euro
Accounts managed by Brian Kelly Capital are short (FXF)
Accounts managed by Brian Kelly Capital are short (JJC)
Accounts managed by Brian Kelly Capital are short (SLV)
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