More Upside Still Likely For the Financial Sector
Posted in Financial Select Sector SPDR Fund (XLF) on August 9th, 2009 by admin – Be the first to commentBy Jim Donnelly, Olson Global Markets
The financial sector, including money center banks, investment bankers, insurance companies and brokers, has experienced a solid and well received turn-around to the upside since the depths of this past year’s devastating selloff.
And while Friday’s last hour pullback (particularly in bank stocks) may portend near-term weakness in the days just ahead, more upside price activity is likely to be achieved over the intermediate term.
From a technical perspective, the Financial Select Sector SPDR Fund, whose ticker symbol is XLF, has already formed of a bullish reverse Head & Shoulders pattern that targets an eventual move up to the $20 area. Friday’s $14.35 close, which sits solidly above former “neckline†resistance at $13, nevertheless caused daily technical studies to move into an overbought condition.
Although these technical conditions raise the possibility for a pullback over the near-term, to “retest†neckline support at $13, such an event would likely present another attractive buying opportunity for financial stocks. Bullish technical divergences continue to support expectations for further gains over the intermediate-term with momentum buying clearly present.
Unless the fundamental picture of the financial sector begins to sour once again, a pullback toward the $13 area on the XLF would look like a “buying†opportunity from this vantage point.