As we kick off another earnings season, the banks will provide us with a preview of what's to come. Out of the major banks that are reporting early in the season, Morgan Stanley stands out as an outperformer that could continue its bullish run towards its all-time highs on strength from its wealth management business. Let's start with a longer-term chart of Morgan Stanley (MS) , which reports on July 16.
We see that it recently broke out above a key $100 resistance level that has been in place since 2023, which puts the $109 all-time highs as a reasonable upside target. And if we zoom in, we see that MS has recently rallied up to a key resistance level at $103. A breakout above this level would be a clear bullish signal, with earnings as the catalyst.
Morgan Stanley has been investing in building out its wealth management business for years and it now accounts for more than 51% of its revenue. With asset prices continuing to rise as inflation continues to trend in the right direction, fees from this division could provide a substantial boost to another earnings beat. Trading at 1.
8 times book value, MS is trading at the upper end of its historical valuation. However, it's recent dividend raise and $20 billion share buyback program speaks to a strong financial outlook. The trade With low implied volatility, options on Morgan Stanley are relatively inexpensive.
To capitalize on the bullish outlook, I am buying the August 16 $105/$110 Call Vertical for a $1.27 debit. This entail.
