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UPDATE: Are Bank Stocks Oversold?

Investors snapped up bank stocks on Monday after published reports suggested the so-called Volcker plan may be in serious jeopardy.

According to the Financial Times, Senator Richard Shelby (R-AL) said “if Democrats push forward with the proposals they risk unraveling much of the bipartisan support already reached regarding the passage of financial regulatory reform in the Senate.”

On CNBC's Fast Money, Washington insider Josh Rosner of Graham Fisher said much the same. “I don’t see a great future for the Volcker Plan as it stands,” he said.

As you may know, the Volcker rule would limit commercial banks' ability to engage in proprietary trading or do business with a hedge fund or private equity fund.

If this new regulation is DOA and no longer poses a serious threat to bank profits, are banks oversold?

Instant Insights with the Fast Money Traders:

I’m not ready to jump into financials, says Pete Najarian. But I am watching 14 as a critical level in the XLF . We’ve held that level for a while. If we can't hold that level, it’s a problem.

If you’re trading financials, it seems to me that we’re in a buy the dip and sell the rip mode, says Guy Adami. If you're a trader, get long.

In the space I like BofA, says Karen Finerman. But I’m not trading in and around the headlines. It’s a long term hold for me. And at current levels I’m getting interested in JPMorgan.

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We also examined the issue on the Fast Money Halftime report. Here’s that recap.

JPMorgan , BofA , Goldman, Morgan and the XLF are all buys on the news, counsels Fast Money trader Joe Terranova. I like the way financials are trading. I see this as a tremendous opportunity.

I can’t feel enthusiastic about financials on the day’s news, counters Zach Karabell of RiverTwice. There’s been no change fundamentally. It's all rhetoric out of Washington moving the stocks. As far as I'm concerned trading the news is one of the great fool-hearty moves.

If the broad market bounces, then I think the financials could bounce, adds Todd Gordon of Forex.com. But otherwise I'm not enthusiastic.


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Trader disclosure: On February 1st, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Is Short (IJR), (IWM), (SPY), (MDY), (UNG), (USO); Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm And Finerman Own (FLS); Finerman's Firm Owns (KFT), (MSFT); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm And Finerman Own (GOOG); Finerman's Firm Owns (BSX); Najarian Owns (AAPL) Call Spread; Najarian Owns (AKAM) Call Spread; Najarian Owns (BP), Is Short (BP) Calls; Najarian Owns (ITMN) Call Spread; Najarian Owns (MS), Is Short (MS) Calls; Najarian Owns (PFE); Najarian Owns (XLF) Calls; Najarian Owns (STLD) Calls; Terranova Owns (XLF) Calls; Terranova Owns (BAC), (JPM), (XOM), (HAL), (OIH), (FCX), (GOOG), (EMC), (DELL), (MSFT), (QCOM); Terranova Is Long British Pound March Futures

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (SKT)

Other Relevant Disclosures:
Terranova Owned (FCX) On 1/29/10


CNBC.com with wires