Charts of the Week – Financials (by Mike Paulenoff)

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One sector to watch in a bullish scenario is the financials, which have lagged in this rally and are due to play catch up. Leading the way has been the Technology Select Sector SPDR (XLK), up 13% from 20.50 to 23.12 in recent weeks. It may be a little extended at the moment for a long trade, while the Financial Select Sector SDPR (XLF) is up just 9.8%. The XLF has huge resistance at 15.00-15.06, but if it can manage to take that out, the financial ETF should accelerate.

Within the financials, Bank of America (BAC) has a lot of potential upside into the 15.20 area if it can claw its way above 14.00/05 from Friday close at 13.60. Conversely, a break below Friday’s low of 13.30 will weaken the pattern, while Thursday’s low of 13.12 would be a sell signal.

JP Morgan (JPM) looks even better than Bank of America, but it has major resistance at 41.20-41.70. If it gets through that 41.70 level, you could make the case it has completed a major W pattern, otherwise known as a double-bottom. With the double bottom at around 35.50, a measured upside follow-through projects to a maximum target of 48.

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