Are Bank Stocks In Trouble? Watch XLF's Head-And-Shoulders Pattern

Are Bank Stocks In Trouble? Watch XLF's Head-And-Shoulders Pattern

XLF Daily Chart.

XLF Daily Chart.

Financial and bank stocks have been lagging the broad market for the past month. While the is posting new all-time highs, the Financial Select Sector SPDR® Fund (NYSE:) 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.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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