How to Trade BB&T and SunTrust Following Merger News – TheStreet.com

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Super regional bank BB&T Corp.  (BBT) is buying its rival SunTrust Banks Inc. (STI) to create a “new bank” by name and ticker – both to be determined, so let’s just call it New Bank. Both stocks rallied on the news with BB&T nearly testing my annual risky level at $51.83 and SunTrust trading on top of my quarterly pivot at $64.73.

This deal makes total sense, given their similar size and fundamentals. According to the Federal Deposit Insurance Corporation, BB&T ended the third quarter with $216.1 billion in assets slightly more than $205.5 billion for STI. At $421.6 billion, the combined “New Bank” will hop into 6th place on the list of banks by total assets.

BBT has a P/E ratio of 11.95 and a dividend yield of 3.34%, according to Macrotrends closely matching STI with a P/E ratio of 10.31 and dividend yield of 3.40%.

The deal is expected to close between Sept. 12 and the end of the year. Until the deal closes, both stocks will continue to trade separately. My daily and weekly charts shown below will set the trading strategies for both regional giants.

As a chartist, one thing I am looking for is whether the new bank will begin trading as a new offering or will the New York Stock Exchange set up an adjusted-historical price history? Without history, it will take 200 weeks of trading before charts become meaningful. This could hurt trading liquidity when the new stock begins to trade.

BB&T will own 57% of New Bank, which will be headquartered in Charlotte, North Carolina, with branches located in the Southeast. Florida is an important state for New Bank as there are more SunTrust banks in the sunshine state. The Street’s banking analyst Bradley Keoun likes the deal due to SunTrust’s sprawling franchise in Florida.

My wife and I moved to Tampa Bay 10 years ago and there are many more SunTrust locations near our home then BB&T locations. In recent years, SunTrust has closed some locations, so in Tampa Bay, cost cutting has already begun.

The Daily Chart for BB&T

Courtesy of MetaStock Xenith

The daily chart for BBT shows that the stock has been below a “death cross” since Aug. 8 when the 50-day simple moving average declined below the 200-day simple moving average indicating that the stock would decline. There were several opportunities to sell the stock at its 200-day SMA at $51.96 before the stock plunged to its Dec. 26 low of $40.68. The “death cross” was quickly offset by a “key reversal” on Dec. 26 when that day’s close was above the Dec. 24 high of $42.42. BBT ended 2018 at $43.32, which was the input to my proprietary analytics. This resulted in four horizontal lines and three are my quarterly and semiannual pivots at $47.30 and $48.42, respectively, with my annual risky level at $51.83. The close of $48.80 on Jan. 31 resulted in my monthly value level at $45.86.

The Weekly Chart for BB&T

Courtesy of MetaStock Xenith

The weekly chart for BB&T has been positive since the week of Jan. 18 with the stock now above its five-week modified moving average at $48.14. The stock is above its 200-week SMA or “reversion to the mean” now at $43.75. The 12x3x3 weekly slow stochastic reading is projected to rise to 62.52 this week, up from 55.45 on Feb. 1.

Trading Strategy: Buy weakness to my semiannual, quarterly and monthly value levels at $48.42, $47.30 and $45.86, respectively, and reduce holdings on strength to my annual risky level at $51.83.

The Daily Chart for STI

Courtesy of MetaStock Xenith

The daily chart for STI shows that the stock has been below a “death cross” since Oct. 24, which was in play when the stock traded as low as $46.05 on Dec. 26. This day was a “key reversal” where the close was above its Dec. 24 high of $48.21. The bear market rally since then reached its 200-day simple moving average at $65.24 on Feb. 7 as the merger deal was announced. STI ended 2018 at $50.44, which was the input to my proprietary analytics. This resulted in four horizontal lines and three are my annual value level at $56.69 and my semiannual and quarterly pivots at $62.54 and $64.73, which has been a magnet since the merger announcement. The Jan. 31 close of $59.43 resulted in my monthly value level for February at $59.84.

The Weekly Chart for STI

Courtesy of MetaStock Xenith

The weekly chart for STI has been positive since the week of Jan. 11 with the stock now above its five-week modified moving average at $59.40. The stock is above its 200-week SMA or “reversion to the mean” now at $53.25. The 12x3x3 weekly slow stochastic reading is projected to rise to 66.59 this week, up from 58.09 on Feb. 1.

Trading Strategy: Buy weakness to my semiannual, monthly and annual value levels at $62.54, $59.84 and $56.69, respectively. My quarterly pivot and 200-day SMA are $64.73 and $65.24, respectively.

A Just-In-Case Strategy: Last year Congress passed a law that rolled back some of the rules put into place by the Dodd-Frank Act. Maxine Waters is now the Chair of the House Financial Services Committee and she indicates that this deal “deserves serious scrutiny.” Since SunTrust outperformed BB&T since the deal was announce owners of STI should book profits and buy BB&T.