Banks and Financials

Banks are in the news, and I have been using the KRE which is the regional banks ETF to trade the situation over the last 2 weeks. As I am writing this, we have seen Silicon Valley Bank, Signature Bank and Credit Suisse go under. Silvergate Capital which is/was another bank that catered primarily to the crypto companies also folded.

While we can get into a debate as to what is going to happen in the end to the regional banks, that in itself is not constructive. I look at everything with an unemotional lens and only care about what does the situation do to my money. Managing my money and taking advantage of the opportunities presented to me are about the only things I have within my control in these situations.

I have been using KRE to trade the regional banks to the downside and that trade has been quite profitable so far. I took off half of my position yesterday. I now have to decide what I do with the balance KRE short position. Let’s look at the KRE chart to start with:

I am purposefully using a 5-year chart because the most interesting thing I see is the “gap fill” from November 2020. We can see that the price was a free fall and has stopped now exactly after filling that gap.

There was no point drawing support and resistance lines or anything else. The price has fallen so much so fast that all those other indicators are meaningless. It is really a tossup where price goes from here.

While the pundits are mostly saying the price losses in the regional banks is overdone, there are no meaningful assurances given to the regional banks depositors that their deposits are covered. I guess it is implicit but not explicit. So, I am thinking why will anyone want to take that risk? There is no reward.

So, I am going to hold the balance of my KRE short position and see how things pan out.