This sector may be your best bet ahead of earnings

Financials are under-owned: Analyst

Is it time to make a deposit into the financial stocks?

The financial sector has been the second worst in the this year, falling 2 percent. This even though the sector is expected to log earnings growth of more than 8 percent in the first quarter, which is the second-best, according to FactSet. That also makes the financials one of the four sectors projected to show earnings growth.

Some analysts are sniffing opportunity. Looking specifically at JPMorgan, Bernstein's John McDonald is raising estimates ahead of earnings, boosting the stock's rating to "Outperform," "on prospects for expense leverage, better trading, opportunity to optimize for new regulatory rules, and leverage to rates," the analyst wrote in a Tuesday note.

Bernstein also boosted its price target on JPMorgan to $70, which is 16 percent above Monday's closing price.

David Seaburg, Cowen's head of equity sales trading, says financials have unfairly flown below the radar.

"The fundamentals are really solid," Seaburg said. "It's a very under-owned group, so I think a lot of money is going to be gravitating here."

"I really think this group, long term, is a buy. And I think ahead of the earnings, it's absolutely a buy," he added.

The options activity also indicates that there's little interest in the financials now, according to Stacey Gilbert, head of derivative strategy with Susquehanna.

Referring to the popular SPDR Financial ETF by its ticker symbol, Gilbert said that "the cost of an XLF option right now is in the bottom quartile of what we've seen in the past year relative to the market—meaning the world, the marketplace itself, is not pricing significant risk into the financial stocks as a whole."

For traders who believe that financial earnings will bring volatility then, "the options are definitely a way to position right now," she said.

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