Earnings season begins next week, with big banks leading the way, followed by smaller regional banks. Our CNBC pro friends Josh Brown and Sean Russo wrote a great article about two local banks poised to move in 2026: PNC and Fifth Third Bancorp. I wholeheartedly agree and think there is much more work to be done in this area. Technically speaking, the pattern that is forming for local banks is very similar to the recovery trend seen across the market, with a decline in 2022, recovery in 2023, and finally a breakout and rally in 2024. The SPDR S&P Regional Bank Index (KRE) has almost fully recovered from the 2022 bear market. Despite last year’s strong performance, local banks continue to lag, and are only just beginning to emerge from the 2023 crisis caused by the failure of Silicon Valley Bank. As 2026 approaches, local forces are beginning to take action. KRE is a safer and more diversified way to play this sector, and while it looks primed for a breakout as seen on the 5-year weekly chart above, I think there is more value in picking individual winners in this sector. I chose Regions Financial (RF). Based in Birmingham, Alabama, Regions is one of the leading companies in the Southeast, the fastest growing region in the United States. Fundamentally, it has outperformed EPS estimates over the past six quarters thanks to consistent growth in net interest income and increased earnings. Like the financial sector as a whole, these companies continue to enjoy strong tailwinds. With fewer regulatory red tape and more M&A activity in the sector, Regions itself, valued at $25 billion, could be a desirable dance partner for major banks looking to expand into the Southeast. Technically, the risk/reward setup is attractive. Let’s look at multiple timeframe charts to demonstrate. On the 1-year daily chart, the price broke through a strong resistance area at the $27 level before breaking out to a new 52-week high. A pullback is possible heading into next week’s earnings, but we’d like to see if the old resistance levels act as new support before resuming the upward trajectory. Both the RSI and MACD momentum indicators are also trending up. This shows that there is room to move further up the ranks. If we get good results, it could rise to $32 in the next quarter. Next is the big picture. Let’s look at this from a bigger perspective. I am old enough to vividly remember the Great Financial Crisis of 2007-2009. I would like to go back and investigate the damage. Some large banks and a few regional banks have never exceeded pre-GFC levels. Others are approaching. Regions are one of them, as seen in the monthly charts for the past 20 years. It looks like a launchpad is being set for the region to return to its previous height. We have had a strong start to the year, with momentum in the sector and expectations for continued strong returns. This setup results in an achievable upside target of $38 over the next 12 months, with a downside risk parameter that is much smaller than the potential reward. — Jay Woods, CMT, Chase Games Disclosure: None. All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, its parent or affiliates, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The Content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
