Don't Ignore This New Breakout in Financials
With AI-related stocks taking a breather, it's time to to look elsewhere for opportunities. Here's how to play the XLF right now.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
I will admit that financials have not been my favorite thing to trade when so much is happening in the world of tech. Even gold held more luster for me to start the year, but it is difficult to ignore another breakout.
We witnessed a breakout early in the Financial Select Sector SPDR Fund XLF ETF in early May. I left the annotations on this chart that I presented back in May.
That breakout worked for around a 5% gain. Not too bad; however, 5% is often a single-day move for tech names in the AI space. That being said, AI-related names are taking a bit of a breather now, so we need to look elsewhere. Small-caps and financials pushed higher Monday amid broader weakness, and financials have the stronger chart, so I am turning my eye there.
Yesterday, we saw the 10-day exponential moving average (EMA) close a penny above the 21-day EMA. These two have been playing touch-and-go, but this crossover worked in conjunction with a price breakout back in May. While history is never guaranteed to repeat, it is more assured to have a pattern that has worked in the past.
The price breakout that happened last Thursday saw a small retrace on Friday with strong follow-through to start the trading week. We are set up to challenge the recent high of around $42.50.
XLF began this move higher from a much higher level than we saw in May. That breakout began at $39, while this move kicked off from $40.25. By the time XLF hit $42.50, it had climbed 9% and needed a breather. A similar move here would take us to $44.
My target on this breakout sits at $45, but I would consider partial profits around $44 and use a close below $40.25 as my signal to take a loss and move on.
At the time of publication, Byrne had no positions in any securities mentioned.
