XLF trade ideas
$XLF Financial Select Sector SPRD Fund ETFFinancial Sector ETF. Break of 24.50 opens 26.40 and even 28.50 targets. Break below 24.00 on the daily will trigger a stop loss.
XLF Gap Fill?FA makes no sense, but price action shows XLF wants to fill the gap. Volume better step in or this is going to make an ugle negative divergence with the RSI.
XLF members underperform. The Financial Select Sector SPDR Fund (XLF) has drastically underperformed the broad market since the COVID-19 March lows (second to Energy XLE). Yesterday XLF gapped up closing at 2433.50 +0.70% whilst holding above its medium-term moving averages on the Daily time frame. During this morning's U.S. session we are seeing weakness amongst the XLF members.
Here are the top 10 XLF drivers and their performance at the time of writing.
Berkshire Hathaway Inc. -0.17%
JP Morgan Chase & Co. -0.1%
Bank of America Corp. +0.04%
Citi Group Inc. -0.66%
Wells Fargo & Co. -0.49%
BlackRock Inc -1.18%
S&P Global Inc +0.04%
Goldman Sachs Group Inc +0.09%
American Express Co -0.63%
Marsh & McLennan Cos Inc -0.62%
Although the fundamentals are not looking great, from a technical standpoint, we are now at a crossroad (1) where overhead supply is dominating today's performance. What happens at (1) will most likely determine the direction for the medium term. In order for the bulls to have the upper hand they will need to overcome twin resistance at (1), sloping trendline and 50% fib retracement, taken from the February highs and the March lows of this year. A break below the black diagonal support line would trigger further downside pressure.
Potential (LONG) Pattern XLFThis is not an investment advice.
Trade at your own risk.
Do not trade money you can't afford to lose.
XLF closed nicely above VWAP from recent highs $30 comingSecond innings of upside starting. Looking very good with limited down side and more upside. $26 and moves on to $30 targets
Banks setting up for another major leg downWhile in the short term it looks like XLF could rally back up to 26-27 if price is unable to significantly get above that level another large leg down in XLF in likely. Breakout above or to the right of the green box would invalidate this. The current bear market rally could last until the end of the year.
OPENING: XLF 23/24 SKINNY SHORT STRANGLE... for a 1.78 credit.
Notes: A naked variation on my trading idea post. (See Below). Looks like that would still be a good setup: paying 1.46 at the mid with a max loss of 1.54, so basically a risk one to make one ... .
Watch this trend line for signs of a banking sector recoveryThe financial sector's technicals are looking more bullish after earnings week, with the MACD above the signal line and the price above a volume support. Banks reported mixed financial results, with sales 4.3% above Street expectations, but earnings 3.3% below Street expectations. The earnings came in weak mostly because banks set aside big piles of cash to guard against future loan losses. So overall, the reports were quite strong and banks look better protected against the coming solvency crisis.
I expect the narrative around banks to remain somewhat negative anyway, with CMBS delinquency rates up 3x in 3 months to 10.32%; Moody's downgrade-to-upgrade ratio near the highest ever; residential mortgage forbearance up to 8.7%; and the annualized corporate default rate higher than the 2009 level. These numbers appear to be worsening every month.
However, any news of stimulus from Congress could allay solvency fears for the near-term and send bank stocks into a new uptrend. Banks have currently made a downward-sloping trend line from their February peak, and with stimulus likely to be announced by the end of July, I think we're likely to see a move upward through the trend line this month. I don't know that I'm prepared to invest a bunch of money in bank shares with the narrative so negative right now, but August 31 calls on XLF at the $24 strike look like a reasonably low-risk gamble, especially if we get a trend line break. (I'd consider taking a real, long-term stake in XLF shares if it retested the $20 or $18 levels.) A couple ways to play this would be to alert the trend line and enter after a break, or to alert the supports at $23.50 or $23 and enter when it hits those supports. You'll get better prices on option calls if you buy the supports rather than a confirmed break of the trend line, of course.
(P.S. Goes without saying, but this is an idea only and not investment advice.)
XLF not constructiveBig banks have reported for the quarter, and as expected those with a strong trading arm ($MS, $GS) strongly outperformed the ones with a stronger retail presence ($BAC, $WFC), with $JPM being the 'best of both worlds'.
Nevertheless, the 10 years does not tell a story of recovery, nor increased loan loss provisions do. Last quarter's performance was mostly driven by volatility in fixed income and equities, and it is not likely to be repeated.
If you want to be exposed to $XLF, suggest covered calls on the long side due to government stimulus sustaining the markets.
The sector is likely to go down fast if the economy is left to itself and data continues to deteriorate.
XLF long set upXLF is entering the zone where it is set to outperform QQQ, this typically means markets will be going up with sectors like XLF outperforming. After XLF previous spike to test the 200dma it has corrected for 30 days in a falling wedge pattern and sitting at a nice support. Earnings for banks are next week and the charts support a bullish reaction. Gap will at around $27-$30 as targets.
