Active Traders Look to Regional Banks for Strength

Amid growing volatility across the global financial markets, active traders have been busy looking for relatively safe places to put their money. Assets such as the U.S. dollar and certain widely followed sectors such as technology have been performing well in recent weeks, but one underfollowed sector that could be worth a closer look at is the regional financials. In this article, we'll take a look at several key charts from this niche segment and explain why it could be the one to watch over the months ahead. (For a quick refresher, check out: Regional, Community Bank Stocks the Next Big Thing.)

SPDR S&P Regional Banking ETF (KRE)

The behemoth companies within the financial sector such as The Goldman Sachs Group, Inc. (GS) and JPMorgan Chase & Co. (JPM) tend to dominate the headlines. For example, the recent news that Goldman Sachs is reportedly backing away from its places to open a bitcoin trading desk essentially eliminated the probability that the smaller regional banks received any mainstream attention. With that said, taking a look at the chart of the SPDR S&P Regional Banking ETF (KRE), you can see that the fund is trading alongside a very influential level of combined support provided by the 200-day moving average and an ascending trendline. Should any positive news catch the airwaves, traders would watch for the price to break above the short-term resistance near the psychological $64 level. A technical breakout would also likely lead to a move toward $70, which is equal to the entry price plus the height of the pattern. (For more, see: KRE: SPDR S&P Regional Banking ETF.)

Technical chart showing the performance of the SPDR S&P Regional Banking ETF (KRE)

SunTrust Banks, Inc. (STI)

One of the regional banks that will likely be the target of many active traders over the coming months will be SunTrust. As the top holding of the KRE ETF, it is unsurprising to find that the chart patterns look nearly identical. This chart is an interesting example of how the price is expected to behave near major long-term levels of support. Notice how the price drifted toward the support level for several months and how it acted as a catalyst to a move higher when the risk/reward turned favorable. The recent price move is evidence that the bulls are in control of the momentum, and the close above the two short-term dotted trendlines suggests that the price is poised to make a move higher. From a risk management perspective, stop-loss orders will likely be placed below $70.82 or $67.69, depending on risk tolerance. (For further reading, see: What Common ETFs Track the Banking Sector?)

Technical chart showing the performance of SunTrust Banks, Inc. (STI)

Huntington Bancshares Incorporated (HBAN)

Another regional bank that could catch the attention of active traders over the coming weeks is Huntington Bancshares. Taking a look at the chart, you can see that the price has been trading within an established uptrend for many months and that the price has recently broken above a key level of resistance. The close above the 2018 high is a technical indication that the bulls are in clear control of the momentum and that there is little resistance standing in the way of a significant move higher. A quick analysis of the chart suggests that some traders may set their target prices near $20.

Technical chart showing the performance of Huntington Bancshares Incorporated (HBAN)

The Bottom Line

Rising levels of volatility and weakening conviction in major uptrends are key themes across many of the sectors, but the regional financials seem to be bucking the trend and look poised to make a move higher from here. (For more on this topic, see: Bulls Take Aim at Financials.)

Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.

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