Monday, January 9, 2012

EWBC: Banking the China Trade

East West Bancorp. Inc. (EWBC), a holding company based in Pasadena, Calif., through its East West Bank focuses heavily on international banking services, especially those involving the China trade.

This regional bank has been on the rise since early October, with top ratings by analysts.

The China exposure could cause a loss of business if China goes bust and quits exporting. Everyone who thinks that's likely, raise your hand. No one? Me too.

That's the EWBC story. But, I'm a chart guy, not an consumer of trader tales or analyst dreams. So, let's look at the chart.

And a thing of beauty it is, for bullish traders, at least. Three of the last four days have shown long intra-day rises, and all four have set higher highs and higher lows.

The last four weeks -- the same. The last four months -- intra-day rises across the board and two higher highs and higher lows.

It is a stock on the move. It has momentum. That alone can be a good reason to enter a position, as long as the trader is prudent with his or her stop/loss points.

On the caution side, EWBC is no blue-sky stock. There is historical congestion in the region where EWBC is now trading, dating from last March. Today's high (so far) is at a level struck in a March decline. The previous peak, at 23.79, is 11.6% away.

But for a short-term play, I'll take 11% any day.

At a micro level, the current rise began today at the open, and has set higher highs for each hour of trading today, and net intra-day rises for all but one of those hours (I'm writing at 2:20 p.m. Eastern).

I selected EWBC using a bracket (see my essay "10,000 charts") from a universe of 185 stocks ranked strong buy by Zacks. The runner-up was CVGI. Third-place went to SLXP, and 4th to ACAT.

EWBC was on the strength of its steady rise across four levels of granularity -- hourly, daily, weekly and monthly.

CVGI, by contrast, has been in a zone of congestion since Nov. 7. If it breaks out of that zone, above $11.88, then it will be a much stronger chart.

EWBC has a strong institutional presence -- 85% -- and decent financials, with a return on equity of  11% and a debt/equity ratio of 0.31.

With an average volume of 938,000 shares, it is liquid, although that level of liquidity is not supporting an active options market: There are only five strikes available for February, and total open interest for all five strikes is 5 contracts.

So if it's a play, it's shares play, not options.

EWBC releases earnings on Jan 24. after the close.

Decision for my account: I bought shares in EWBC.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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