This is a Financial Select Sector SPDR ETF (XLF) stock chart update, as requested by a Trendy Stock Charts member.

Financial Select Sector SPDR ETF (XLF) Stock Chart Review

This first chart is a 2 year weekly candlestick chart to help identify some support areas for the XLF using trendlines. Based on the Fibonacci Retracement Tool I placed on XLF’s recent uptrend, XLF’s share price could see another 8-10% correction based on today’s closing price.

A 38.2% or a 50% Retracement is Most Likely Based on Its Elliott Wave Structure

The MACD Histogram confirms the current weakness for the financial sector since it illustrates increasing selling momentum. There is also increasing selling volume.

XLF – Golden Ratios Achieved

This is a 3 year weekly chart. It has 2 different Fibonacci Extension Tools overlaid on it. Since the Golden Ratios have been reached for each of the Fibonacci Extension Tools, a price reversal may not take place until the $21 area. That would represent an approximate 9% decrease from current price levels.

Using Fibonacci Extension Tools to Calculate the Golden Ratio (the 161.8% Target Lines) of the Uptrend

Selling into strength during the current week or next week is probably the best course of action based on the weekly charts. Weekly charts depict a medium-term trend. Depending upon how long the rally lasts that started this morning, use that strength to exit positions in the near-term.

XLF – Moving Averages

This is a 1 year daily Financial Select Sector SPDR ETF (XLF) stock chart reflecting moving averages. Analyzing this daily candlestick chart shows a little higher support area, around the $22 price level.

Analyzing Short-Term Support Areas in the Event of a Continued Pullback

If the XLF cannot break back above its 50 Day moving average in its next rebound attempt, that would be the best opportunity to scale out of a position at the highest price in the short-term.

After a stock has been in an uptrend, the first large amount of selling volume typically helps to identify Wave 4 in a Bullish Impulse wave pattern. If that is the case, that means that at least one more 52 week high needs to be made.

BAC – Support Areas

This is a 2 year weekly candlestick chart for Bank of America (BAC). I threw this chart in for comparison purposes and also since it was part of the request. Let’s see if we can apply some expectations from XLF’s weekly charts to BAC’s chart.

Analyzing Short-Term Support Areas for BAC’s Share Price

It would appear that BAC’s chart is very similar to XLF’s chart. BAC’s share price should continue its rebound back towards the 50 Day moving average. Any struggles at that area are an indication to trim some shares and repurchase them on a re-test of the $22 low with also saving cash for a possible drop to the $20 area.

You can probably insert about any of the bank stocks into the above XLF breakdown. BAC’s analysis sure seemed to agree with the charts for XLF.

Financial Select Sector SPDR ETF (XLF) Stock Chart Review – Summary

Shorter-term traders and investors – the short-term trend for the financial sector is down, at least for now. Using any strength in the sector to trim your positions and reduce your exposure and wait for better trading opportunities to set-up.

Longer-term investors just stay the course. Use any pullbacks to the areas identified above to add to your portfolio positions. In an era of rising interest rates, banks will stand to make more money. If you purchased any shares in the last few days, great. Now wait to see how the re-test of the 50 Day moving average works out. If it fails to retake the moving average line, wait for a re-test of the previous low around the $22 area. Use that pullback to make one last purchase of shares during the current consolidation period.

Don’t let the shorter-term moves fool you into thinking the sector is not going to perform well.

On deck: Check the Idea Chamber throughout the day tomorrow – I plan on updating a lot of companies through the Idea Chamber as it is a easier and quicker for me to post. I will be able to cover more stocks that way. Keep checking throughout the day as I will be posting charts periodically.