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On the Saudi Banks

Posted: 12/22/2013 - 11:20 am

On December 8, we said that Saudi’s Samba (1090) was positioned attractively and we advised initiating positions at 49.50 despite the absence of a visible catalyst (read: Is it a buy?).

The on December 18, we highlighted the stock’s bounce on increasing trading activity and we said that the move could very much be the catalyst we had been looking for (read: This could be it).

Interestingly enough, this view was validated with a major breakout in the following session. Thursday’s move pushed the gains on our trade to 4.5% and it hints at further upside.

That said, we should note that Thursday’s rally appears to be part of a “Bank Rally” theme that seems to be in play at the moment.

Therefore, our bullish view extends beyond Samba and applies to the rest of the sector.

Below are some of bank stocks that look set to rally and in which we recommend taking positions.

AlRajhi (1120):
The trading range that has been in place for nearly two-months sets the stage for a breakout. The slight but obvious pick-up in buying activity lately suggests an upside rather downside break especially given the recent positive performance in many of the Saudi bank stocks.

We recommend an entry at no higher than 76.00 with a stop at 74.00. w.

Saudi Fransi (1050):
The recent volatility and increasing trading activity reflects a change in psychology. The stock has had many positive breakout attempts and a successful one could finally take place. It would be wise to be positioned for such a move.

We recommend an entry at no higher than 34.70 with a stop at 33.00

Riyad Bank (1010):
The stock has shown an early breakout sign from the 28.00-29.00 range that has been in place for nearly two months. The high-volume breakout on Thursday clearly justifies an entry.

We recommend an entry at no higher than 29.30 with a stop at 28.50.

We also suggest keeping all targets open for now.

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