Stocks quoted in this article:
The financial sector will be on investors' radar next week, as a number of big-name banking concerns step into the earnings limelight. Citigroup Inc (NYSE:C) will take to the stage before the market opens on Monday, followed by notables Goldman Sachs Group, Inc. (NYSE:GS) on Tuesday and Bank of America Corp (NYSE:BAC) on Wednesday. Here's a quick look at the technical and sentiment backdrops for GS and BAC heading into next week's quarterly announcements.
Despite starting the year off on a solid note, Goldman Sachs Group, Inc. (NYSE:GS) has sputtered since tagging a fresh 52-week high of $159 on Feb. 19, with the shares off 7% since then to trade at $147.89 this afternoon. In fact, the stock's most recent rally attempt was quickly halted by its 40-day moving average -- a trendline that provided support in March.
Option traders have taken notice of this negative price action, and have been placing bearish bets at a rapid pace. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.65 ranks higher than 96% of similar readings taken in the past year. In other words, puts have been bought to open over calls at a near annual-high clip in recent months.
Investors are less bearish outside of the options pits, where short interest accounts for a low 1.3% of the stock's available float. In fact, it would take fewer than two sessions to cover these shorted shares, at GS' average daily pace of trading.
Fundamentally, the company has a strong history in the earnings confessional, besting analysts' bottom-line expectations in each of the past four quarters. For Goldman Sachs' first quarter, analysts are predicting a profit of $3.88 per share.
Bank of America Corp (NYSE:BAC), meanwhile, has had a stronger technical showing of late, with the stock up more than 10% from its Feb. 25 year-to-date low of $10.98. Highlighting this positive price action is BAC's 80-day moving average, which has proven itself as a steady layer of support on a few recent pullbacks. The equity took a solid bounce off this trendline last Friday, and was last seen hovering near $12.13.
Short-term option traders have turned a blind eye to Bank of America's technical prowess, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.12. Not only does this show that put open interest outweighs call open interest among options with a shelf life of three months or less, but it ranks in the 95th percentile of its annual range. In other words, near-term traders have rarely been more put-heavy toward the stock. In the front-month series, specifically, peak put open interest can currently be found at the underfoot April 12 strike. Going forward, BAC could find some options-related support, as the nearly 139,000 contracts that reside here begin to unwind ahead of next Friday's expiration.
The skepticism toward BAC has spilled outside of the options arena, as well, as no fewer than 15 out of 26 analysts have slapped the stock with a "hold" or "strong sell" rating. Plus, the consensus 12-month price target of $12.49 represents a slim 3% premium to the equity's current perch. As such, the door is wide open for a round of upgrades and/or price-target hikes, should BAC unveil strong earnings next Wednesday.
Speaking of earnings, Bank of America Corp's bottom line has arrived above analysts' forecasts in each of the last three quarters. Wall Street is calling for a per-share profit of 22 cents in BAC's first quarter.