The Financial Select Sector SPDR Fund (XLF) has been a big focus for traders and investors lately with the failures of SVB Financial Group's (SIVB) Silicon Valley Bank and Signature Bank (SBNY) . Trading volume has soared and the price of this closely followed ETF has plunged quickly, which may have unhinged some traders.
Let's check out the charts and indicators of XLF to see what may lie ahead for the banking ETF.
In this daily bar chart of XLF, below, I can see that prices plunged below the 50-day and the 200-day moving average lines in recent days. The slope of the 50-day line has just turned negative. The trading volume has surged sharply in recent days, telling me that traders are voting with their feet. The On-Balance-Volume (OBV) line shows weakness this month and is close to making a new low for the move down. A weak OBV line tells me that sellers of XLF are more aggressive than buyers. The trend-following Moving Average Convergence Divergence (MACD) oscillator has moved below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of XLF, below, I see a bearish picture. Prices are back below the 40-week moving average line. The lows of 2022 are poised to be tested. The weekly OBV line is weak and bearish, in my opinion. The MACD oscillator has crossed to the downside for a take profits sell signal. A move below the zero line and an outright sell signal is likely.
In this daily Point and Figure chart of XLF, below, I can see a potential downside price target in the $27 area.
In this weekly Point and Figure chart of XLF, below, I can see the same $27 downside price target as the daily chart above.
Bottom line strategy: XLF has declined sharply in a short period of time, so there is a possibility of an oversold bounce or rebound at any point in time. However, without a new base pattern the odds favor further declines in the days ahead.
