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5 Financial Stocks to Sell Before They Crash

The selloff will hit financials next ... sell while you can

As the recent market weakness rolls on, areas of resistance are falling sector by sector . Energy stocks were the first to fall. Then it was industrials, retail, transports and now technology.

Last week, many big-tech momentum stocks I had previously warned about were the targets of selling pressure, with names like Intel (INTC) and Google (GOOG) getting slammed lower as smooth, unadulterated uptrends were violated.

That post generated some angry skepticism from readers, but resulted in a number of very profitable trades: The October $35 INTC puts I recommended to Edge Pro subscribers in late September went on to gain nearly 220%.

The last major sector to succumb to the darkness is financials. Here is a list of five stocks to sell. For more aggressive investors, these financial stocks represent short-side opportunities.

Financial Stocks: Goldman Sachs (GS)

Goldman Sachs (GS) shares are testing down to their 50-day moving average for the first time since early August. A major break of this level would be the first since April. This looks likely, as the stochastic indicator loses momentum at a pace not seen since March. The firm’s bottom line would be impacted by any continuation of the recent market selloff, since it would hit investment banking and brokerage revenue.

Financial Stocks: Bank of America (BAC)

Shares of Bank of America (BAC) are rolling lower as doubts grow over the company’s mortgage business amid a slowdown in the housing market. We’ll know more when the company reports the latest quarterly results today. For now, I’m looking for a drop back below the 200-day moving average and have recommended the November $17 BAC puts to my Edge Pro subscribers. The position is up more than 30% already.

Financial Stocks: American Express (AXP)

American Express (AXP) shares have been one of the weaker performers in the Dow Jones Industrial Average lately, falling back to February lows on a nagging suspicion that the U.S. consumer isn’t as healthy as many believe. On a weekly basis, this is AXP’s most serious pullback since 2011 and is catching many investors by surprise after they’ve gotten used to the stock’s smooth, easy rise over the last few years. The October $87.50 AXP puts I recommended to Edge Pro subscribers on mid-September are up nearly 144% already.

Financial Stocks: Citigroup (C)

Citigroup (C) is testing its 50-day moving average for the first time since August as the entire sector rolls over. Shares jumped Tuesday morning on better-than-expected Q3 results, but it looks like a rebound to sell. A drop in long-term interest rates will pressure net interest margins at a time when the company is exiting 11 markets due to a lack of competitiveness. The outlook for Citigroup stock is not good, so don’t get too excited about the rebound.

Financial Stocks: Wells Fargo (WFC)

Wells Fargo (WFC) is watching as shares test their 200-day moving average for the first time since 2012 in what could be the start of the stock’s most significant pullback in years. Again, concerns over the health of the housing market are weighing on sentiment, pushing shares back to levels first seen in May. The company reported Q3 results on Tuesday morning that were in line with estimates, but investors were disappointed by a slight drop in margins and relatively cautious comments from management on housing.