Many traders and analysts use the SPDR S&P Regional Banking ETF (KRE) as a barometer/thermometer of the regional banking industry in the U.S. The failure of Silicon Valley Bank is still fresh in traders' minds, so let's check out the charts of the KRE again.
In the daily bar chart of KRE, below, I can see a bearish setup. Prices have rallied from a low in May but the indicators have not confirmed the move up. KRE trades just slightly above the flat 50-day moving average line but below the declining 200-day moving average line.
The trading volume has declined from heavy turnover in March and May. A strong rally should have increased trading volume. The On-Balance-Volume (OBV) line has been in a decline the past year and tells me that sellers of KRE have been and still are more aggressive than sellers. The Moving Average Convergence Divergence (MACD) oscillator is bearish.
In this weekly Japanese candlestick chart of KRE, below, I can see a problematic picture. Prices are still in a longer-term bear move as they trade below the declining 40-week moving average line.
Weekly trading volume has declined on the rebound. The weekly OBV line improved in May and June but has turned lower from July. The MACD oscillator is bearish. A top reversal pattern is visible in late July.
In this daily Point and Figure chart of KRE, below, I can see a price target in the $50 area.
In this weekly Point and Figure chart of KRE, below, I can see a potential downside price target in the $38-$37 area.
Bottom-line strategy: Savvy traders often think about what could go wrong instead of only focusing on a bullish narrative. A fresh decline in the KRE could upset a lot of bullish traders who believe that regional banking problems are behind us.
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