The SPDR S & P Bank ETF (CFU) rebounded to an eight-month high last week on hopes of a strong economic recovery and higher interest rates following the distribution of the COVID-19 vaccines. The rally tracks the ongoing rotation of pandemic beneficiaries in sectors hardest hit by the virus. However wishful thinking is adding to the upward trend as many people are likely to refuse to take vaccines and high unemployment Overcoming it could take several years.
The central theses
- Many large banks hit an eight-month high in November.
- The advance has now reached a price level that favors reversals.
- A recovery in the sector is unlikely in the short term due to high and low unemployment interest.
Dow component JPMorgan Chase & Co. (JPM) has carved out the strongest technical pattern since hitting a three-year low in March and is eventually trading above the June high. This is not the case with Bank of America Corporation (BAC), Citigroup Inc. (C.) or Wells Fargo & Company (WFC), highlighting uneven performance and the likelihood that buying interest will soon run out of gas. Indeed, Citi looks promising Short sale Candidate here rather than a game of values.
Additionally, the Biden administration is unlikely to be friends with the banking sector, as harsh sentiments have lingered since the 2008 economic collapse that govern the political goals of Elizabeth Warren and other progressives. That doesn’t make sense, of course, as the industry’s role as a convenient scapegoat is obsolete and big tech giants pose a far greater threat to capitalism and democracy than the residents of Lower Manhattan.
ONE Short sale is the sale an asset or stock that the seller does not own. It is generally a transaction in which an investor sells borrowed securities in anticipation of a fall in prices. The seller is then obliged to return the same number of shares at a later date. In contrast, a seller owns the security or inventory in a long position.
The SPDR S&P Bank ETF crowned at the .786 Fibonacci retracement of the decline from 2007 to 2009 at the beginning of 2018 and entered a downward trend that was initially noticeable support Mid-30s in December. It posted a lower high in the fourth quarter of 2019 and then fell again, breaking support for 2018 amid the decline in the pandemic. The fund bounced back from that seven-year low and stopped after 50 days exponential moving average (EMA) in April before a successful support test in May.
The subsequent rise failed the 200-day EMA in the mid-1930s in June, while the rally that began earlier this month found new support at that level. However, the price has now reached hard resistance at the 200-week EMA, which was broken to large volume in February. This level has also aligned with the Fibracci sell-off retracement level at 0.618, increasing the chances of a reversal and pullback filling November gap.
JPMorgan Chase The stock rounded off its 2000 high at $ 67.17 in 2015 and broke out after the 2016 presidential election, rising to $ 119.33 in February 2018 Resistance level in October 2019 and rose higher, hitting an all-time high of $ 141.10 on the first day of trading or 2020. The stock failed the March breakout, falling to its lowest low since the election before the rally reversed in June after rising the 200-day EMA.
The November 9 gap broke resistance and lifted the stock to an eight-month high where it dragged sideways at a small rate Pennant pattern. Unlike the banking index, JPMorgan Chase stock is now trading above the 50- and 200-week EMAs, offering greater upside potential. However, the rally has now encountered resistance at the failed breakout and the Fibonacci sell-off retracement level at 0.618, setting the stage for a reversal that will close the gap in November.
Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. They are based on Fibonacci numbers. A percentage is assigned to each level. The percentage indicates how much of a previous movement the price has tracked. The Fibonacci retracement values are 23.6%, 38.2%, 61.8% and 78.6%.
The bottom line
Bank stocks gained ground in November in hopes of a strong economic rebound, but it looks like the rally will run out of steam.
Disclosure: The author held no positions in any of the above securities at the time of publication.