Ally Financial (ALLY) stock suffered a 17.1% bear gap on Sept. 10 after the bank issued a dire credit warning. However, the stock pared a chunk of those losses to only finish September only 3.2% lower, and to end the month, was added to Citi’s Focus List as a top pick. The analyst in coverage believes “ALLY is well-positioned to benefit from improving credit and an expanding net interest margin (NIM).” Even though the shares have consolidated since that sharp gap lower, ALLY’s dip has a historically bullish signal flashing.
Per data from Schaeffer’s Senior Quantitative Analyst Rocky White, Ally stock is trading within one standard deviation of its 320-day moving average. After the last two times ALLY pulled back to this trendline after a long stretch above it, it averaged a 6.7% pop over the next month. A move of similar magnitude would put the equity near the $37 area, almost filling that Sept. 10 gap lower.
ALLY is trading well below its July 31 year-to-date high of $45.46, and now sits just below its 2024 breakeven level. Longer term, the shares are up 30.1% over the last 12 months. An unwinding of analysts’ pessimism could give the equity more tailwinds. Of the 19 covering brokerages, 10 recommend a “hold” or worse rating.