Remember the 1970’s TV show Eight is Enough. Well top trader Steve Cortes says Eight is Enough for Bank of America shares, too.
Cortes calls this the Tom Bradford trade; (that’s the patriarch of the Bradford family played by Dick Van Patten.)
The pop culture reference is intended to be a slice of fun, but Cortes’ trade is quite serious.
He says with Bank of America flirting with the $8 level, there are three major reasons to short the stock.
- Technicals: “The stock has had an incredible rally and is now very overbought,” he says. $8 generated resistance last August and Cortes thinks it happens again.
- Lazard: “Rival firm Lazard gave a foreboding analysis of capital markets business in general,” says Cortes. He thinks BofA and most other firms face exactly the same challenges
- Yield Curve: “Treasury yields are staying low defying Street predictions – I think the 10 year stays under 2%,” he says. That makes it tough for banks to make money.
Cortes goes on to say, “pricing power in the economy is muted – we’re not seeing wage growth – in fact real wages are declining – I see a slog forward.”
All these catalysts are negative for banks; hence the short position. “The risk reward makes sense to me,” he says.
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Trader disclosure: On Feb. 7, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS; Terranova is long LQD; Terranova is long MUB; Terranova is long IBM; Terranova is long EMC; Terranova is long AXP; Terranova is long AAPL; Terranova is long TRLG; Terranova is long JOY; Terranova is long SNDK; Terranova is long MCD; Terranova is long MA; Terranova is long OXY; Terranova is long SU; Terranova is long CNX; Terranova is long CSCO; Terranova is long SBUX; Terranova is long FXE; Terranova is long TBT; Cortes is long MO; Cortes is long SO; Cortes is long Treasuries; Cortes is short SINA; Cortes is short BAC; Cortes is short Silver;
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