Earnings season kicks off next week, led by the big banks and followed by their smaller brethren – the regionals. Our CNBC Pro friends Josh Brown and Sean Russo wrote a great piece about two regional banks ready to move in 2026 in PNC and Fifth Third Bancorp – I concur wholeheartedly and think there’s an even bigger play in the sector. Technically speaking, the patterns we see forming in the regional banks are quite similar to recovery trends we saw in the overall market as we recouped from 2022’s drop in 2023 only to truly breakout and run higher in 2024. The SPDR S & P Regional Banking Index (KRE) has almost made a full recovery from the 2022 bear market. Despite a solid performance last year, the regionals continue to lag and are just starting to get out of the 2023 crisis created by the collapse of Silicon Valley Bank. To kick off 2026, the regionals are starting to make their move. While the KRE is a safer and more diversified way of playing the sector — and seems poised for a breakout as seen in this five-year weekly chart above — I think there is more reward to pick the winners in this sector individually. My pick is Regions Financial (RF) . Based in Birmingham, Alabama, Regions is one of the dominant players in the fastest growing area of the U.S. — the southeast. Fundamentally, they have surpassed EPS expectations the past six quarters thanks to consistent growth in net interest income and rising profits. They, like the entire financial sector, continue to have a strong tailwind behind them. With less regulatory red tape there has been more M & A activity in the sector and Regions themselves at a $25 billion valuation could be a desirable dance partner for a larger bank looking to make deep inroads into the southeast. Technically, the risk/reward setup is appetizing. Let’s look at the charts on multiple time frames to demonstrate. On a one-year daily chart, we broke out to new 52-week highs after clearing a strong resistance area at the $27 level. While a pullback is possible as we head into next week’s earnings, look for the old resistance level to act as new support before resuming its upward trajectory. Momentum indicators in both the RSI and MACD are trending higher as well. This also shows there is room to run higher. Look for a push to $32 over the next quarter on good results. Then there’s the big picture. Let’s put this in an even larger perspective. I’m old enough to remember the 2007-2009 Great Financial Crisis vividly. I like to go back and examine the damage done. Some of the major banks and a handful of regionals have never eclipsed their old pre-GFC levels. Others are getting close. Regions is one of them as seen in this 20-year monthly chart. The launch pad seems set for Regions to return to its prior heights. We have a breakout to start the year, momentum in the sector and the hope of continued strong earnings. This set-up gives us an achievable upside target of $38 over the next 12 months with downside risk parameters that are far less than the potential rewards. — Jay Woods, CMT with Chase Games DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
