Financials Tried to Break Out, But They Didn’t Succeed
The Select Sectors Financials ETF is closely associated with stimulus and a reopening of the U.S. economy. Now that those hopes are fading, it may present a downside opportunity.
The main thing jumping off XLF’s chart is the falling 200-day simple moving average (SMA). This has cut down like a knife since the pandemic began, quashing rallies in June and early September. Now in October, prices tried to break out but they didn’t succeed.
XLF has also traded in a relatively tight range recently, which we see in the compression of both Average True Range and Bollinger Band Width. If volatility increases, that range could widen with prices declining. Levels like the September low under $23 and the July low around $22.50 could be in play.
Overall, XLF is a pretty straightforward play on economic sentiment. Unlike technology and the Nasdaq-100, it has little benefit from coronavirus. Traders expecting more negativity and potential nervousness around the election may apply pressure if the situation worsens.
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The main thing jumping off XLF’s chart is the falling 200-day simple moving average (SMA). This has cut down like a knife since the pandemic began, quashing rallies in June and early September. Now in October, prices tried to break out but they didn’t succeed.
XLF has also traded in a relatively tight range recently, which we see in the compression of both Average True Range and Bollinger Band Width. If volatility increases, that range could widen with prices declining. Levels like the September low under $23 and the July low around $22.50 could be in play.
Overall, XLF is a pretty straightforward play on economic sentiment. Unlike technology and the Nasdaq-100, it has little benefit from coronavirus. Traders expecting more negativity and potential nervousness around the election may apply pressure if the situation worsens.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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