Possible inverse head & shoulders pattern on BB&T

Regional banks have gotten hit pretty hard after the latest Fed meeting. With the Fed announcing plans to keep the Fed Funds rate at the current level for the foreseeable future, it hampered banks to a degree.

When interest rates are rising, the spread grows between what banks charge on loans and what they pay on deposits. This helps banks and their profitability. With the Fed becoming more dovish, the spread is likely to remain stable or possibly even decrease for the rest of the year.

The SPDR S&P Regional Bank ETF (NYSE: KRE) has been lagging the overall market since the January Fed meeting. At that meeting, the Fed used more dovish terms to describe the rate policy. The announcement after the March meeting left little doubt about the path the Fed intended to take going forward. After that meeting, the KRE fell over 11% in three days.

One regional bank that caught my eye was BB&T (NYSE: BBT). The weekly chart shows a possible inverse head and shoulders pattern forming. The stock dipped down to the $44.50 level back in the fall and then rallied up to the $52 area. This formed the left shoulder and neckline. The stock then fell to almost $4o to form the head. The stock rallied back to the $52 area to form the right side of the neck and has now fallen back down to the $44.50 area to form the right shoulder.

For the formation to be completed, the stock would need to rally back to the $52 level and breakout from there.

From a fundamental perspective, BB&T has decent measurements. The earnings have grown at a rate of 12% per year over the last three years and grew by 25% in the most recent quarter. Sales have grown by 7% per year over the last three years and they grew by 8% in the last quarter.

The profit margin is well above average at 32.4% while the ROE is average at 11.2%.