Raymond James said Tuesday that the technical picture for bank stocks is deteriorating even as company fundamentals continue to look favorable. In an analysis prepared with Technical Strategist Javed Mirza, the firm highlighted weakening price momentum and relative strength for the KBW Bank Index, commonly tracked under the BKX ticker.
The note pointed out that the BKX has moved beneath its 40-week moving average, which the analysts cited at about 154.12, a level they consider technically important. That breach positions the index to potentially probe its first support near 139.54. Raymond James calculated that a drop to that support would represent roughly a 6.4% downside from current levels.
In addition, the firm observed that the index is near the threshold for a new monthly mechanical sell signal. Raymond James said similar signals in the past have tended to accompany multi-month corrective phases for the sector, suggesting a period of extended downside or consolidation could unfold if the signal is triggered.
The analysts also flagged geopolitical and commodity-price risks that could exacerbate weakness. Specifically, they noted that a protracted conflict in Iran and a related rise in energy prices have the potential to move the market into Phase 3 of Raymond James' Market Cycle Model - a phase in which financial stocks typically lag the broader market.
Even amid the broader technical weakening, the firm identified three names that retain constructive technical characteristics: Dime Community Bancshares (NASDAQ:DCOM), ConnectOne Bancorp (NASDAQ:CNOB) and Columbia Banking System (NASDAQ:COLB). Raymond James said all three exhibit positive relative strength and are trading above their respective 40-week moving averages, which the firm interprets as confirmation that their intermediate-term price trends remain upward.
Summary: Raymond James and Technical Strategist Javed Mirza find the KBW Bank Index's technical indicators weakening, with the index below its 40-week moving average and nearing a mechanical sell signal; three regional banks still show positive technical momentum.