2 Bank Stocks in Danger of Downgrades

Fidelity National Information Services Inc (NYSE:FIS) and ICICI Bank Ltd (ADR) (NYSE:IBN) haven't performed as well as other bank stocks since the presidential election

Alex Eppstein
Dec 16, 2016 at 9:28 AM
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Bank stocks have ranked among the top sectors since the presidential election. However, shares of some financial firms have underperformed. For contrarians like us, the key is in finding stocks where there is a disconnect between performance and sentiment. In this case, both Fidelity National Information Services Inc (NYSE:FIS) and ICICI Bank Ltd (ADR) (NYSE:IBN) appear to be overloved, relative to how they've fared on the charts.

Take, for example, FIS. At $77.35, the stock has barely budged since the election. In fact, the shares are one of only a few within the banking sector not perched above the 80-day moving average.

Not to mention, the $80 level has begun to materialize as a layer of resistance, capping the stock's late-November gains. Moreover, with a burst of buy-to-open activity yesterday at the January 2017 80-strike call, the position is now home to peak open interest among all FIS options. This could potentially reinforce resistance over the next month.

That hasn't stopped Wall Street from growing extremely bullish toward Fidelity National Information Services Inc. Nearly 90% of analysts tracking the stock have doled out a "buy" or better recommendation. If the shares fail to make a meaningful move higher, a round of downgrades could intensify selling pressure.

IBN is another bank stock residing below its 80-day trendline. This wasn't the case prior to the election, but since then, the shares have retreated 6.6% to trade at $7.66

If there's a silver lining to be found, it's that IBN recently touched its 160-day moving average. This is the sixth occurrence over the past three years, and returns have historically been bullish after the fact. Specifically, the stock has averaged a 21-day post-signal gain of 5.3%, with 60% positive.

That said, ICICI Bank Ltd could be in trouble if it fails to bounce. While only two analysts track the shares, both have handed out a "strong buy" recommendation. In other words, IBN may be vulnerable to a round of downgrades and/or bearish analyst initiations.

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