Are Bank Stocks In Trouble? Watch XLF's Head-And-Shoulders Pattern
Chris Kimble | Jul 07, 2021 09:54AM ET
Financial and bank stocks have been lagging the broad market for the past month. While the S&P 500 is posting new all-time highs, the Financial Select Sector SPDR® Fund (NYSE:XLF) is trading below its highs.
So what’s the big deal?
As you likely know, the financial sector is a big part of the economy and stock market, so bulls would prefer to see healthy financial and bank stocks.
On one hand, the price action can be called a bullish consolidation as buyers take a breather and allow overheated prices to cool off. On the other hand, the price action has taken the shape of a head-and-shoulders topping pattern and may be warning of further downside.
OK, so let’s turn our attention to today’s featured chart. As you can see, XLF has been lagging and is mired in a downtrend over the past month. This chart comes from by Investors Business Daily!
During this time, XLF could be creating the right shoulder of a bearish head-and-shoulders pattern at (1). This pattern is also taking shape below the 50-day moving average.
If further weakness ensues at (2) and the price breaks below $35, the odds increase that financials/banks have put in a near-term high!
Will buyers show up here? Or, will bears continue to pressure XLF lower? Stay tuned.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.