The U.S. financial sector is home to some of the largest banks and investment management companies in the world. It is often the most closely watched sectors by both fundamental and technical investors due to the predictability of the underlying business and strong trends that drive the stock prices. In this article, we'll take a look at several bullish chart patterns from across the sector suggesting that the next leg of the multi-year uptrend is about to begin.
Financial Select Sector SPDR Fund (XLF)
Given the nature of exchange-traded funds such as the Financial Select Sector SPDR Fund (XLF), it is now possible for retail investors to target their exposure to niche sectors such as U.S. financials. Taking a look at the chart shown below, you can see that the price of the XLF fund has been trading within a defined range since the start of 2019.
Notice how each of pullbacks toward the lower part of the channel provided followers of technical analysis interesting buying opportunities. Nearby support combined with the bullish crossover between the 50-day and 200-day moving averages will likely be used as a buy signal and could mark the beginning of a major move higher. Stop-loss orders will most likely be placed below $26.16 to protect long positions from a sudden shift in market sentiment.
Citigroup Inc. (C)
One of the largest and most widely followed financial companies in the United States is Citigroup Inc. (C). The price of Citigroup shares is often looked to by investors as a barometer for the overall health of the financial sector.
As you can see from the chart, the bullish momentum from April provided the needed gains for triggering a golden crossover between the long-term moving averages. The common buy signal is often used by followers of technical analysis to mark the beginning of a major move higher. It is interesting to note how the 200-day moving average acted as a strong level of resistance for part of 2019 and how it has now reversed its role and become a key level of support. From a risk-management perspective, stop-loss orders will most likely be placed below $64.04 in order to maximize the risk-to-reward ratio.
JPMorgan Chase & Co. (JPM)
JPMorgan Chase & Co. (JPM) has been an unwavering pillar of strength within the financial sector since its founding in 1799. Strong leadership combined with an extremely strong balance sheet makes JPMorgan stock a favorite of long-term investors.
Taking a look at the triangle pattern on the chart below, it is clear to see why JPMorgan is also currently a favorite of active traders. The recent bullish crossover between the long-term moving averages combined with the converging trendlines is creating an interesting trading setup. Traders will be on the lookout for a break above the nearby trendline, which could act as a catalyst for a break higher due to the likely flood of buy-stop orders. Bullish traders will most likely look to protect their positions from a sudden shift in sentiment by placing stop-loss orders below the combined support near $106.29.
The Bottom Line
The U.S. financial sector is one of strongest-performing market segments in the world due to the dominant nature of the underlying businesses. Based on the stock charts discussed above, it looks as though this sector will continue to be a favorite of long-term investors and active traders alike for the remainder of 2019.
At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.