Financials (XLF) Bullish Wedge or forming Head of H&S
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Financials have sputtered as of late, and this can be interpreted in two ways:
Scenario 1: This is a bullish wedge and because of expected future interest rate hikes financials will break out and create new highs in the $32 -$35 range for the
XLF. Supporting this is the RSI hit lows previously seen on 3/22 and all the way back to the beginning of 2016. Stoch has also recently hit a low and moving upward.
Further, the selling pressure has been strong but the stock has remained in the bullish wedge pattern.
Scenario 2: Selling pressure will break through the wedge formation and the stock will retrace to the ~$23 level. XLF has declined following almost every recent interest rate hike. Stock will retrace to $23 then bounce off support and subsequently fall after hitting resistance (previous support line for wedge).
In the market we are in, I would error on the side of the trend (bullish). However, based on the way financials have behaved as of late, I would not be surprised if scenario 2 would occur. Either way, breakouts either way could be quite profitable if the proper stops are put in place.
Scenario 1: This is a bullish wedge and because of expected future interest rate hikes financials will break out and create new highs in the $32 -$35 range for the
XLF. Supporting this is the RSI hit lows previously seen on 3/22 and all the way back to the beginning of 2016. Stoch has also recently hit a low and moving upward. Further, the selling pressure has been strong but the stock has remained in the bullish wedge pattern.
Scenario 2: Selling pressure will break through the wedge formation and the stock will retrace to the ~$23 level. XLF has declined following almost every recent interest rate hike. Stock will retrace to $23 then bounce off support and subsequently fall after hitting resistance (previous support line for wedge).
In the market we are in, I would error on the side of the trend (bullish). However, based on the way financials have behaved as of late, I would not be surprised if scenario 2 would occur. Either way, breakouts either way could be quite profitable if the proper stops are put in place.
Note
Well when both scenarios play out you can't be too upset. Break in resistance trend line at about $25.00-25.25 would be bullish, but i expect downward pressure to build and send XLF back to $23. This would create a rather large H&S pattern, which if confirmed a drop to $20 is likely.
Note
Like George Costanza, do the opposite of everything I say
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