The big banks are first up to bat this second-quarter earnings season, but only one stock’s technicals look positive heading into their report.
Wells Fargo has the potential for a post-earnings breakout, according to Instinet senior equity trader Frank Cappelleri.
“Wells Fargo got hit especially hard” earlier this year, Cappelleri, senior equity trader at Instinet, told CNBC’s “Trading Nation” on Monday, pointing to a 25 percent drop from its year-to-date peak in late January to trough in mid-April.
“Since then, it’s been doing much better than the XLF here, outperforming,” added Cappelleri.
Wells Fargo has added nearly 5 percent since the beginning of June, while the XLF financials ETF is essentially flat. It has also outperformed the — over that same period, the benchmark period added 3 percent.
“That’s interesting because it’s much different than what the other big banks look like,” added Cappelleri.
Since the beginning of June, J.P. Morgan has held flat, Goldman Sachs is up less than 1 percent, Citigroup is up 2 percent, and Bank of America has dropped 0.5 percent.
Michael Bapis, managing director of The Bapis Group at HighTower Advisors, has high hopes for positive results across the sector this earnings season.
“We’re very bullish on the space. It’s kind of flown under the radar this year; it’s lagged the rest of the sectors,” Bapis said on Monday’s “Trading Nation.” “There’s a rising interest rate environment. There is fiscal tax stimulus. That’s only going to help them."
The financials sector is negative for the year and the S&P 500’s second-worst performer over the past three months.
“We expect earnings to be positive at the end of the week,” added Bapis. “If that changes, then obviously the whole sector would get hit, but we would buy on any weakness, and we would continue to own the space going forward.”
Financials kick off the second-quarter earnings season at week’s end. Citigroup, J.P. Morgan, Wells Fargo, and PNC Financial are scheduled for Friday morning.
