Market players have the weekend to digest Brexit. Closing weak and just off the lows hasn't done many favors for Monday optimism.
For now, I'm ignoring the after-hours action as it was less than 10% of what we saw trade during the regular sessions. The selloff did continue, so it is worth noting, but when focusing on the technical picture I am only looking at closing prices. Given the timeframe, a Brexit will likely take should it actually occur. This isn't a one-and-done headline event. The uncertainty is going to carry forward for not only the U.K., but all of the European Union.
The initial big hits on individual names Friday came from the U.K., which was expected, so no surprise there. The question is how much damage occurred and does it create an opportunity or merely expand the fault lines of disaster? Today, I'm focusing on a small handful of financial names: Barclays (BCS), Royal Bank of Scotland (RBS), and Lloyds Group (LYG).
If I had to pick the best in the group, and I use that term loosely, it would be BCS. The stock managed to finish well off Friday's lows and on the weekly chart we can see the stock closed much lower in late March. Again, don't misinterpret what I'm saying here. This is like looking at spoiled meat and trying to guess which one might cause the least stomach turmoil if you decided to cook them all up and serve them. BCS has the least amount of flies swarming at the moment. The MACD is still bullish and the Full Stochastics still sits over 50. We have seen bearish crossovers in the same Full Stochastics as well as the StochRSI and Chaikan Oscillator. None of these are positives. Like I said, plenty of flies and it still smells sour. As long as BCS closes over $8.50, the smell is just sour, though and not quite rancid. That is saved for the other names. A bounce into the $9.50 to $9.75 should be seen as an exit opportunity.
LYG is intriguing if only because it offers a pretty clear stop. A weekly close under $3.30 or a daily close under $3.15 and this one should be off everyone's dead-cat bounce list. I can see the draw of the bounce thesis here as an oversold bounce to $3.50-3.60 appears possible. But anything into $3.70 to $3.90 begs for an exit. We have a bearish crossover in every single indicator from volume to momentum to trend. The past bounces from these oversold readings have been anemic, so I don't have much faith in seeing anything over $3.70. While LYG sets up a bit better in terms of assumed risk vs. reward on a stop level vs. an upside target than a name like BCS, one has to understand the risk here becomes much greater if trading anything other than intraday scalps. Expect the gap action to continue in a name like LYG.
RBS is the head-scratcher of the bunch. The $6 level has now established itself as strong resistance, but in terms of support, I have no idea based on price action. We're into no-man's land here. The Chaikan Oscillator has fallen off a cliff and we see bearish action in the StochRSI and Full Stochastics as well. Almost unbelievably the slower MACD is still bullish. But I would expect that to change this week as we see it turning lower already. None of these conditions match the very few bounce/buy points over the past 18 months. There is no reason to think that changes now. If we get a bounce in RBS, we'll see it in the other names and since they offer either a better picture or clearly defined buy and sell points, I would avoid RBS completely here. Should we bounce into the $6 range, then it will be worth a re-examination, but until that point I would focus on either LYG or BCS is looking for a trade.