Big banks have been the big movers of the stock market this year. As a group, the financials are up an impressive 17%this year, which is well above the 10% move by the market. Some of the bigger banks – such as Bank of America (NYSE: BAC) – are up an unbelievable 60% this year.
Investors have embraced bank stocks for the first time since 2008. Part of the appeal for banks stems from how badly they underperformed other sectors over the years. But many analysts believe banks are fundamentally sound once again. The Fed happens to agree with Wall Street analysts, too.
Last month, the Fed released its latest stress test results for big banks. The Fed has done stress tests in the past, but this round was more extreme than any done before. In the stress test, the Fed stacked 19 banks against extreme economic parameters including a 13% unemployment rate and another 21% decline from housing.
The stress test results were encouraging. Only four of the 19 banks tested failed, which prompted the bank sector to move 10% higher following the announcement.
A strong pullback last week brought many banks right back to where they were prior to the stress test. Additionally, many banks will report earnings this week after JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE:WFC) reported numbers last week.
With banks trading near a support zone developed after the stress test results, now could be a great time to buy ahead of earnings. The following video reviews how to trade three of the biggest banks in the country (Citigroup, Bank of America, Goldman Sachs) before they report earnings this week.
Editor, TradeMaster Daily Stock Alerts
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