Charles Schwab Corporation (SCHW) is my favorite bank stock for the coming year, notes Bernie Schaeffer, an industry leading expert on sentiment, technicals and options — and editor of Schaeffer's Investment Research.

Charles Schwab completed the acquisition of discount brokerage rival TD Ameritrade on October 6. Yet, it was not until early in November that investors had developed a heightened appreciation for the major potential upside for the company.

As a result of this giant acquisition, as the shares appreciated by about 30% from November 4 into year's end 2020. But it was the nature, rather than the magnitude of this rally, that attracted us to the stock as a potential “break-away” stock for 2021.


First, the advance was founded in the very strong business metrics the firm has reported since absorbing TD Ameritrade.

Highlights from the November 2020 activity report (released in mid-December) included 1) net new client assets gained 168% from November 2019, and 2) new brokerage account openings for November surged year-over-year from 127,000 to 430,000.

Second, the granular daily price action underlying this year-end rally was characterized by a very bullish technical pattern, in which all pullbacks were contained at the sharply rising 10-day or 20-day moving averages.

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In addition, this rally plowed through the resistance in the $50 area that had characterized SCHW’s price action since the fourth quarter of 2018.

With the “new” SCHW now on the threshold of $100 billion in market capitalization, the May 2018 all-time high at $60 is already within sights — with additional upside potential to the $70 area as the year progresses.

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