Bes Stocks To Buy 2014, Best Stocks For 2014: Are Flagstar Bancorp (FBC) & Pacific Sunwear of California (PSUN) Really Top Rebound Candidates?

Monday, February 27, 2012

Are Flagstar Bancorp (FBC) & Pacific Sunwear of California (PSUN) Really Top Rebound Candidates?

A lot of small cap stocks are starting to perk up, but none look quite as inviting as Flagstar Bancorp, Inc. (NYSE:FBC) and Pacific Sunwear of California, Inc. (NASDAQ:PSUN) do right now. But, are these charts to be taken at face value? Though it's the perceived value of FBC and PSUN that should be guiding these charts, the fact is, it's the shape of the charts that may be guiding investors to a "half full" conclusion in the half-empty/half-full debate. Take a look.

For Pacific Sunwear of California, Inc., the rally's been underway since December, but didn't get really juicy until this week when PSUN moved above its 200-day moving average line (green) for the first time since early 2011. That being said, it's worth noting that (1) the buyers barely even flinched when the 200-day line was approached, and (2) the buying volume actually increased as PSUN was plowing through that key long-term average. As for the underlying reason though, a couple of quarters' worth of rising top line and shrinking losses may get a big chunk of the credit.

Yes, PSUN is still losing money. There's a light at the end of the tunnel though. The $905 million revenue the company has booked over the past four quarters stops the bleeding revenue trend, and odds are good that 2012's expected sales figure of $889.7 million is simply too low given the unfurling - even if slow-moving - improvement trend. The pros are still thinking Pacific Sunwear of California will 'only' lose $0.78 per share in 2012, but that's actually progress... and sometimes progress is enough to get a stock going again. That's what's happening here anyway, and speculators may want to jump on board this technical strength.

Just to put this bullish reversal from Pacific Sunwear, check out! this we ekly chart.

As for Flagstar Bancorp, Inc., this chart doesn't look as compelling with just a quick glance, but there's a lot more going on with this small cap S&L stock than you might think.

For starters, FBC has finally - legitimately - stopped its own bleeding by using support at the $0.46 level (orange). That pause bought the bulls enough time to muster a rebound effort that has gotten traction... enough traction to push Flagstar Bancorp shares above all the key short-term moving averages, and even muster a few bullish crosses of those moving averages.

The final step in this recovery process for FBC will be a move above the 200-day moving average line (green) at $0.81, but that attack is already underway.

Like Pacific Sunwear of California, this rally from Flagstar Bancorp, Inc. is entirely stemming from a case of "the worst is over", and there are no profits to speak of yet. There are some projected for the near future though. While turning a $0.06 per-share loss into a $0.02 per-share profit isn't going to change the world, it's enough to set up some trade-worthy movement right now.