Financials (XLF) Bullish Wedge or forming Head of H&S
Financials have sputtered as of late, and this can be interpreted in two ways:
Scenario 1: This is a bullish wedge and because of expected future interest rate hikes financials will break out and create new highs in the $32 -$35 range for the
XLF
. Supporting this is the RSI hit lows previously seen on 3/22 and all the way back to the beginning of 2016. Stoch has also recently hit a low and moving upward.
Further, the selling pressure has been strong but the stock has remained in the bullish wedge pattern.
Scenario 2: Selling pressure will break through the wedge formation and the stock will retrace to the ~$23 level. XLF has declined following almost every recent interest rate hike. Stock will retrace to $23 then bounce off support and subsequently fall after hitting resistance (previous support line for wedge).
In the market we are in, I would error on the side of the trend (bullish). However, based on the way financials have behaved as of late, I would not be surprised if scenario 2 would occur. Either way, breakouts either way could be quite profitable if the proper stops are put in place.
Scenario 1: This is a bullish wedge and because of expected future interest rate hikes financials will break out and create new highs in the $32 -$35 range for the
XLF
. Supporting this is the RSI hit lows previously seen on 3/22 and all the way back to the beginning of 2016. Stoch has also recently hit a low and moving upward. Further, the selling pressure has been strong but the stock has remained in the bullish wedge pattern.
Scenario 2: Selling pressure will break through the wedge formation and the stock will retrace to the ~$23 level. XLF has declined following almost every recent interest rate hike. Stock will retrace to $23 then bounce off support and subsequently fall after hitting resistance (previous support line for wedge).
In the market we are in, I would error on the side of the trend (bullish). However, based on the way financials have behaved as of late, I would not be surprised if scenario 2 would occur. Either way, breakouts either way could be quite profitable if the proper stops are put in place.
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Like George Costanza, do the opposite of everything I say
Break in resistance trend line at about $25.00-25.25 would be bullish, but i expect downward pressure to build and send XLF back to $23. This would create a rather large H&S pattern, which if confirmed a drop to $20 is likely.