Is Regions Financial Corp (RF) Poised to Continue Its Post-Trump Rally?

Skepticism surrounds Regions Financial Corp (NYSE:RF), even as the bank stock has been quietly outperforming since the election

Karee Venema
Dec 7, 2016 at 1:22 PM
facebook twitter linkedin


U.S. stock markets have soared to record heights since Donald Trump unexpectedly cleared his path to the White House in early November. As Schaeffer's Quantitative Analyst Chris Prybal noted, bank -- and energy -- stocks, in particular, have been leading the charge higher. While big banks Goldman Sachs Group Inc (NYSE:GS) and Bank of America Corp (NYSE:BAC) have commanded much of the attention among financial stocks, shares of regional bank Regions Financial Corp (NYSE:RF) have been quietly climbing up the charts. Nevertheless, sentiment toward the bank stock is tilted in a skeptical direction, suggesting their could be more fuel in RF's tank.

In the options pits, for instance, RF's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is docked at 0.35. While this indicates more calls have been bought to open than puts on an absolute basis over the past 10 weeks, the ratio is perched in the elevated 87th annual percentile. In other words, bearish bets have been initiated relative to bullish at a faster-than-usual clip.

Echoing this is RF's Schaeffer's put/call open interest ratio (SOIR) of 0.37, which rests above 69% of all comparable readings taken in the past year. Simply stated, speculative players are more put-heavy than usual among options set to expire in three months or less. Drilling down, peak put open interest for RF in the front-month December series is found at the underfoot 13 strike --  which could serve as a foothold for the shares in the near term, as the hedges related to these bets unwind ahead of expiration at next Friday's close.

Elsewhere on Wall Street, shorts have been quick to increase their bearish exposure to the outperforming bank stock. In the most recent reporting period, short interest jumped 23.5% -- even as RF was soaring to levels not seen since the 2008 financial crisis. In fact, there are now 41.9 million RF shares sold short, the most since February 2011. RF stock could get a lift, should some of these short sellers throw in the towel on their losing positions.

Meanwhile, RF stock appears to be long overdue for a round of bullish brokerage attention. Of the 20 analysts currently covering the financial shares, 16 maintain a "hold" or "strong sell" recommendation. Plus, the average 12-month price target of $13.08 stands at a discount to the security's present price. Upgrades and/or price-target hikes could translate into a fresh burst of buying power for RF.

Diving deeper into the stock's technical backdrop, the shares of Regions Financial Corp (NYSE:RF) are up nearly 30% from their Nov. 8 close of $10.89. What's more, RF stock hit an eight-year peak of $14.27 yesterday, and were last seen trading pennies shy of this notable milestone, at $14.25. The bank stock could garner more attention next week, when the Federal Reserve unveils its latest policy decision -- with expectations high that the central bank will raise interest rates for the first time since last December.

RF daily since january 2016

Schaeffer's Expiration Week Countdown subscribers just made 202% GAINS on Goldman Sachs (GS) calls! Sign up now for a trial subscription.

A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 

Partnercenter