On the face of it, Morgan Stanley (MS) stock is looking solid right now. Around November 7, 2016, the stock was trading at $33 per share, but the surprise election of Donald Trump scented into the stratosphere. A month of unprecedented gains so MS stock rising above $40 per share, and consolidating in a tight range between $42 and $44 per share.

In 2017, incremental games have been racked up, based largely on Fed sentiment, calls for deregulation of the financial sector, and a possible move to lower corporate taxes in the region of 15% – 20%. So far, deregulation and taxation are moot points. However, the Fed is front and center, with guns blazing ready to pull the trigger on the second rate hike since December 2016.

Get the Facts – MS Stock is Bullish and Here is Why

For binary options traders, the more pertinent question is how MS stock is performing. A cursory look at the above chart indicates that the stock price is well above the 200-day moving average of $34.85 per share, and marginally higher than the 50-day moving average of $44.19 per share. This is a clear bullish indicator to traders. If we turn our attention to value propositions, the price/earnings ratio of MS stock is 15.88, well beneath the 20+ P/E we are so used to seeing. This indicates that there is value to be had in MS stock. The banking giant posted a $2.92 earnings-per-share with a dividend of $0.80 and a yield of 1.73%.

Incidentally, the 1-year target estimate price is $47.42 per share – higher than the prevailing price. These are all positive signals with which to base trading decisions on. Taking this a step further, analyst recommendations for Morgan Stanley stock have turned bullish. Consider that there are now fewer analysts issuing a hold rating on the stock and more analysts issuing a buy rating on the stock than in February 2017. As investor sentiment shifts towards a buy/strong buy rating, so the needle has moved from a hold recommendation to a buy recommendation. The last 2 upgrades since 20 October 2016 have been positive with Guggenheim and Societe Generale issuing a buy rating on the stock. Armed with this information, we have a stronger case for call options.

What about the Fed and Morgan Stanley – Is Liquidity Being Drained from the System?

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Government inefficiency is nothing new. The Trump administration has quickly become an all bark and no bite White House, as Congress and the judiciary are flexing their muscles to hamstring the president at every juncture. This means things like tax cuts and deregulation are going to be mired in bureaucracy for months, perhaps years to come. However, the Fed acts independently of the White House and Congress. The FOMC will be meeting on Tuesday and Wednesday next week to decide on the federal funds rate. Based on the latest probabilities, there is now a 90.8% likelihood of the Fed raising rates next week. This means that banks like MS, BAC, C, WFC and others will be licking their lips in anticipation. As interest rates rise, so banks can charge more on money they lend out. This has a multiplier effect on the profitability of big banks and financial institutions.

Take a Tip: Watch the Directional Flow of Bank Stocks

The first phase of the postelection rally was fabulous for bank stocks. We saw financials hitting record levels, and although there has been a slowdown during Trump’s second month in office, the momentum is still there. We are seeing more of a stop-start grinding movement with financials now, with incremental gains and a slow ascent to higher levels. While markets are certainly not surging now, it is clear which direction bank stocks are moving. As a binary options trader, that’s pretty much the only component that matters – directional movement.