Tuesday, May 5, 2015

XLF Financials Daily Chart Sideways Symmetrical Triangle Tight Bands

The banks are at a key inflection point. Price will have to decide which way to exit the triangle and the XLF gaps +1% higher yesterday to the upside. The tight standard deviation bands (pink) are going to squeeze out a big move and it looks like the bulls have the upper hand so far. With such a strong move higher, the bears would have to reverse it within one or two days at most, otherwise, up is the direction for the breakout. Interestingly, the three prior fractals for the tight band squeeze (pink boxes) all sent price outside the band only to quickly reverse completely back to the opposite side; two first broke out higher then reversed lower and in March the breakout was lower but quickly reversed higher.

The broad indexes will likely follow financials so the behavior in banks is extremely important this week. UBS reports big profits overnight and soars +7%. HSBC reported good results but is whacked -2.5%. The vertical side of the triangle is about 1.70 so price may either seek 26 (24.3+1.7) on the upside, or on the downside, 22.4 (24.1-1.7). On the way up since last Fall, the XLF has left some juicy gaps behind that will need to be filled in the future (circles). This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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