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Bank Stocks Jump Higher On Valuation
The bank stocks surged on Wednesday on the back of cheap valuations. Since the beginning of 2011, most financial stocks are down dramatically, continually hitting new 52 week lows. This past week, earnings have come from all the major players. Solid earnings were reported by JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC), while weak earnings emerged from Goldman Sachs Group, Inc. (GS) and Bank of America Corporation (BAC).
Most amateur traders would be surprised to see Goldman Sachs and Bank of America rallying sharply. The reason behind this is clearly valuation. The negative earnings news was already priced into both stocks. In fact, it appears it was overpriced based on their strong move higher today. Always remember, the news is already known by the big boys, thus the stocks generally reflect it already. When Bank of America reported close to a $9 billion loss, the mutual funds and small investors started selling. This is exactly the right time to do the opposite and buy. Sure enough, the stock reversed yesterday, and soared on Wednesday. Bank of America closed up 2.9% at $9.85.
Gareth Soloway
InTheMoneyStocks.com
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