Putting PNC in the Spotlight
Options Trades by Better Trades
Significant put buying on Monday, March 9th hinted at some bad news for regional
banking giant PNC Financial (PNC). Open interest on PNC's April 10 puts surged as
buyers scooped up the options, making the stock's implied volatility jump 20%.
There was no follow-through reflected in PNC's shares the following day due to a
massive rally that saw the market post a 6% advance. Bank stocks soared on Tuesday,
March 10th after Citigroup CEO Vikram Pandit's all clear siren song, boasting that
the besieged bank turned a modest profit thus far in 2009.
Also adding to the suspect rally was word from Senate Banking Committee member
Barney Frank who thinks the uptick rule will return in the coming days.
Monday's put action still looms for PNC.
Taking a look at technicals, the stock prices of major U.S. banks are painting a
stark picture. Citigroup (C): $1.40. Bank of America (BAC): $4.76. Wells Fargo
(WFC): $11.55. U.S. Bancorp (USB): $10.15. These stocks are so beaten down that
they have needed billions in cash infusions from Uncle Sam to stay relevant.
Now, take a look at the stock prices of the first and fifth largest U.S. banks,
JPMorgan Chase (JPM) and PNC Financial Services: $18.88 and $23.78. They're down
from historic highs, but trade a far cry away from the ignominious realm of other
near penny stock super banks.
Putting our fundamental analysis hat back on, these banks still hold huge amounts
of toxic assets. And after the mark-to-market suspension debate was put to bed,
we're guessing there are still hefty balance sheet problems related to these
non-performing assets in the banking sector.
PNC is in the process of digesting former rival-turned failed lender National City.
They just slashed their dividend from 66 cents to 10 cents. The banking sector
remains a whirlwind of instability.
On Friday, March 6, PNC hit a 52-week low at $16.20, down from their 52-week high
of $87.99. Tuesday's rally provides a lot of channeling room between the current
market price around $24.30 and the 52-week low.
Over the past two months, every time PNC shares approached their 20-day exponential
moving average, the share price saw huge declines in the ensuing days. The trend
goes back even further discounting the December 30 through Jan 9 period, the only
time in the past 5 months that PNC has closed above its 20-day ema. PNC's shares
plunged after its share place crossed below its ema on January 9. After a
precipitous drop, the banks' shares recouped and approached the 20-day moving
average.
It'll be an interesting next few days for the super-regional bank.
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