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With a new report showing a substantial improvement in bank earnings should you start nibbling at the sector?Many investors were turning over the possibility after a new report from the FDIC said U.S. bank earnings rose in the first three months of the year to the highest level in nearly five years.Looking at the numbers, the FDIC said the banking industry earned $35.3 billion in the January-March period. That's up from $28.7 billion in the first quarter of 2011 and the highest level since the second quarter of 2007.
If you have a long-term time horizon, banks are probably worth a look, according to CNBC Contributor Ron Insana. Broadly he thinks they're attractive but Insana is talking over a period of months and years. "If you go into financials, scale into the XLF buying a 25% position each month over the next four months."However, if you're a short-term trader, Insana says trade the space with caution. “There are so many headwinds, playing banks right now is like trying to catch a falling knife.”Trader Stephanie Link agrees. From increased regulation to the blossoming woes of Europe, she sees far too many headwinds for short term traders.
If you must put money to work in this space and you're a nimble trader, Guy Adami says take a look at Morgan Stanley. “Off yesterday’s reversal I think Morgan Stanley is interesting with a $12.75 stop,” he says.
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