TFC in the "Valley of Risk"

15. März 2023

Preface and Disclaimer: I have a long term stake in Truist Financial Corp TFC :(

I wondered "why" Truist, company I have held for a very long time (when it was BB&T) would have been caught up in this contagion of small bank risk fears. An article by Seeking Alpha sheds some light on it:
seekingalpha.com/article/4587352-truist-immense-unrealized-bond-losses-threaten-core-equity-stability

TL;DR, over the weekend analysis dug into their books and found that Truist was exposed to some of the same risk factors, namely low yield securities, as Silicon Valley Bank NASDAQ:SIVB. It is not existential risk, as Truist has a much better Deposit ratio than SVB, but it may impact the bank's profitability in the future.

This fiasco is an example of why I do not assume bankers, Wall Street analysts, or "whales" operate at some vastly greater intelligence.

In hindsight... buying up tons of low yield treasuries does not seem risky. But once something happened... suddenly EVERYONE realizes how risky it actually is and now EVERYONE is paying attention. There are thousands of people earning high 6 figs to look at and data crunch these numbers every day for months and only NOW realize they have a systemic risk problem.

In my own analysis which I study and try to apply dispassionately I too can look back in hindsight at the price action of TFC and see a clear warning sign I missed.

In the summer of 2022 TFC was hovering around the 50% Retracement Level support from the COVID low to All Time High. I study and trade this key level every day on every timeframe. It's a technical analysis that I have learned to trust.


By October 2022 price had clearly violated and broken the level as a part of the broader market selloff. This bearish trend that persisted through 2022 was not secular to TFC or banking. What it should demonstrate though is a secular lack strength to HOLD its own trend despite market conditions.


Often price will hesitate and/or recapture said level... consolidating around it.


The damage to the bullish trend though is already done and if one ignores these warnings the position is in danger of falling into what I call "The Valley of Risk" where there are no more supports until the last major low (The COVID low) and sometimes even beyond. That is where TFC has fallen today on this recent FUD.

I still believe that TFC is a strong bank. This move down has put it into some spectacular dividend yield territory (6.45% as of writing). For a pure dividend play for me it is a hold. But as a technical trader I put this in my catalog of examples of how a bullish trend gives ample warning of failure before it truly drops.

20. Apr. 2023

Anmerkung

Took another position as a bottom play on TFC April 4th which is still live. I'm going to dedicate a post to it today.