Take it to the Bank

• Posted by Greg Harmon
• on August 31st, 2016

The banking sector has started to perk up. Since the top in July of 2015 this sector has been a laggard. In fact it is more than just banks. The entire financial sector is heating up. It looks like it is time to take your portfolio to the bank.

The weekly chart of the Financial Sector ETF ($XLF) below starts to tell the technical picture. The long run off of a low in late 2011 started to roll over in July 2015. A major spike down in August scared many. A bounce to a lower high and then a repeat move lower in January got the rest. And it looked to be getting worse. Another lower high in May this year had the price fall back again.

But notice how each low was a higher low. It found support each time against the rising 200 week SMA. And the tops created falling trend resistance. Put together they built a consolidating symmetrical triangle. Here buyers and sellers are swapping the strong position in a tightening range as supply and demand work itself out. A break of the triangle to the upside 3 weeks ago made the first higher high. And it established a target on the triangle break to about 29.50 on the ETF.

The longer term monthly chart above shows that this would be a significant move. A break above the July 2015 high establishes a trend reversal higher on the long term scale. It would also take the ETF over the 61.8% retracement of the move lower during the financial crisis. The next long term target on this retracement would be to 31.24. With the momentum indicators on this scale turning bullish that could just be the beginning. Are you ready for a major move in all financials?

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If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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