Investing in 'Too Big to Fail' Banks After Earnings

Recent earnings releases from the four "too big to fail" money center banks did not result in share price volatility, as each stock remained below its 2018 highs set between Jan. 29 and March 12. My most significant observation is that banks were supposed to benefit from higher interest rates, and the Federal Reserve has been hiking the federal funds rate since December 2015. There have been eight rate hikes, and the latest was on Sept. 17, raising the rate to 2.00% to 2.25%. However, despite higher rates, the big banks set 2018 lows between April and July.

Here's a scorecard for the four "too big to fail" money center banks:

Here's a scorecard showing that total assets among the big banks are declining:

Bank of America Corporation (BAC) is the second largest of the four "too big to fail" money center banks, with total assets of $1.776 trillion at the end of the second quarter, down from $1.784 trillion at the end of the first quarter. The stock closed Monday at $27.92, down 5.4% year to date and in correction territory at 15.5% below its March 12 high of $33.05. The stock is just 1% above its 2018 low of $27.63 set on July 6.

Bank of America stock is below its 50-day and 200-day simple moving averages of $30.45 and $30.48, respectively, but weakness has stabilized under the influence of my semiannual and monthly pivots at $28.47 and $27.99, respectively. Investors looking to start a long position should consider doing so with the stock between $28.47 and $27.99. Keep in mind that my annual value level lags at $20.93.

Citigroup Inc. (C) is the fourth largest of the four "too big to fail" money center banks and had total assets of $1.398 trillion at the end of the second quarter, down from $1,407 trillion in the first quarter of 2018. The stock closed Monday at $69.21, down 7% year to date and in correction territory at 14.2% below its 2018 high of $80.70 set on Jan. 29. The stock is 7.5% above its 2018 low of $64.38 set on June 26.

Citigroup stock tried to rebound following its earnings report but stayed below a "death cross" that formed on April 26, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices were ahead. These averages are now at $71.27 and $71.49, respectively. The horizontal lines on the chart at $72.47 and $73.43 are my semiannual and annual pivots, respectively. Investors looking to start a long position should consider doing so on weakness to my monthly value level at $61.85.

JPMorgan Chase & Co. (JPM) is the largest of the four "too big to fail" money center banks, and the banking giant ended the second quarter of 2018 with total assets of $2.30 trillion, down from $2.33 trillion in the first quarter. The stock closed Monday at $106.34, down 0.6% year to date and in correction territory at 10.9% below its all-time intraday high at $119.33 set on Feb. 27.

The daily chart for JPMorgan shows the stock below its 200-day simple moving average at $112.11. The stock is stabilizing between my monthly and semiannual pivots at $106.70 and $109.39, respectively, which are the two horizontal lines in the center of the chart. Investors looking to start a long position should consider doing so with the stock between $106.70 and $109.39. Keep in mind that my annual value level lags at $93.20.

Wells Fargo & Company (WFC) is the third largest among the four "too big to fail" money center banks, with $1.694 trillion in assets at the end of the second quarter of 2018, down from $1.737 trillion at the end of the first quarter. The stock closed Monday at $53.24, down 12.2% year to date and deep into correction territory at 19.7% below its all-time intraday high of $66.31 set on Jan. 29.

The daily chart for Wells Fargo began 2018 setting its all-time intraday high of $66.31 on Jan. 29. The price gap lower on Feb. 5 was caused after the Federal Reserve indicated that it would restrict the bank's size given the widespread consumer abuses. The stock plunged by 24.2% to its 2018 low of $50.26 set on April 18. At the high, the stock stayed below my annual risky level of $67.18. As the second half began, the stock traded back and forth around my semiannual pivot of $57.40, which is the horizontal line at the center of the chart. Investors looking to start a long position should consider doing so on weakness to my monthly value level at $43.80. My semiannual risky level is $57.40.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.