Barclays Share Price Analysis Ahead of the Bank Earnings Season

Summary:
• Barclays share price has sold off lately as concerns about the UK and the global economy continue. The stock retreated to a low of 143p

Barclays share price has sold off lately as concerns about the UK and the global economy continue. The stock retreated to a low of 143p, which was the lowest level since May 12 of this year. It has crashed by more than 18% from the highest level this year and by more than 345 from its highest level this year. Focus now shifts to the upcoming bank earnings season.

Bank earnings kick off

This will be a big week for the financial market as the biggest globally systemically important banks (GSIBs) deliver their results. The four banks that will report – Citi, JP Morgan, Morgan Stanley, and Wells Fargo – have  67% of all GSIB assets with their $10.6 assets. Barclays is one of the GSIBs.

Therefore, the company’s stock will likely react to these results. Analysts believe that most banks will see weak performance of their investment banking division since deal-making has died this year. This decline will be offset by an increase in net interest income due to the relatively higher interest rates. 

The Bank of England (BoE) and the Federal Reserve have all hiked interest rates aggressively this year. Higher rates lead to more income since they charge more for any new loans and credit products they are approving. As such, analysts believe that earrings by the leading US banks will drop by about 22% in the quarter.

However, higher rates and risks of an economic meltdown will likely see more provisions for bad loans. Analysts expect that the biggest US banks will allocate more than $4.5 billion to cover potential losses from bad loans.

Barclays share price forecast

The daily chart shows that the BARC stock price has been in a strong bearish trend in the past few weeks. In this period, it has dropped below the important support level at 145.18, which was the lowest level on July 14. It has also moved below the 25-day and 50-day moving averages. Similarly, the MACD has moved below the neutral point. 

Therefore, the stock will likely continue falling as sellers target the next key support to watch will be 130p. A move above the resistance at 150p will invalidate the bearish view.