Red Flags Waving on Fifth Third Before Earnings

Fifth Third Bancorp (NASDAQ:FITB) will report fourth-quarter earnings ahead of the stock market open next Tuesday, Jan. 22. FITB stock has a history of positive earnings reactions -- closing higher the next day in six of the past eight quarters, with an average gain of 1.8% -- but warning signs are flashing ahead of the Cincinnati-based bank's scheduled event.

For starters, Fifth Third has been one of the worst stocks to own the week following Martin Luther King Jr. Day, looking back 20 years. Per data from Schaeffer's Senior Quantitative Rocky White, the equity has averaged a loss of 6.3% for MLK week, with 80% of its returns negative.

Plus, the shares have rallied hard off their Dec. 26 two-year low of $22.12, up 0.7% today at $26.60, and headed toward their sixth straight win. However, FITB is now trading near familiar resistance at their 80-day moving average, and data from White shows in the four other times FITB has run into this trendline over the past two years, the stock has averaged a five-day loss of 1.8%, which widens to 3.5% at the two-week mark.

Meanwhile, there's plenty of skepticism priced into the bank stock before earnings, with 70% of analysts maintaining a lukewarm "hold" rating on FITB. Plus, the February 22 put is home to peak open interest of 6,516 contracts, and data from Trade-Alert points to mostly buy-to-open activity here.

Elsewhere, short interest surged 23% in the two most recent reporting periods to 18.38 million shares -- the most since mid-September. However, this accounts for just 2.8% of Fifth Third's available float, meaning the bearish bandwagon is far from full.