Charts Suggest Traders Buying Regional Banks on the Dip
Fears of a potential global pandemic have triggered significant pullbacks across the financial markets. While many investors flock to safety and move their investments into cash, others are looking at the charts in an attempt to find buying opportunities. As you'll read about in this article, for bullish traders looking to buy into the recent pullback, one of the market segments that could be worth a closer look is U.S. regional banking.
SPDR S&P Regional Banking ETF (KRE)
Luckily for active traders, with the rise in popularity of niche exchange-traded products, it is possible to quickly analyze nearly any sector of the market. This week, one chart that is most likely popping up on the radars of active traders is the SPDR S&P Regional Banking ETF (KRE). As you can see below, rising prices in late 2019 triggered a bullish crossover between the 50-day and 200-day moving averages, which was a signal of the start of a long-term uptrend.
Monday's pullback forced the price back toward the combined support of the dotted trendline and the 200-day moving average, which many are expecting to act as a strong floor that will stop a continued decline. With the current risk-to-reward setup, it is likely that followers of technical analysis will look to place buy orders as close to current levels as possible in anticipation of a bounce higher. In order to protect against continued weakness, stop-loss orders will most likely be placed below $53.50.
SVB Financial Group (SIVB)
As the top holding of the KRE ETF, SVB Financial Group (SIVB) is likely going to be the target of attention for many active traders over the week ahead. Taking a look at the chart, you can see that the price has fallen toward the influential support near $240. Active traders will most likely anticipate a bounce off of the dotted trendline and will either place their stop-loss orders below the trendline or the 200-day moving average at $225.58 depending on risk tolerance.
First Republic Bank (FRC)
Another top holding of the KRE ETF that could be worth a closer look is First Republic Bank (FRC). As you can see from the chart, there are a few ways that a follower of technical analysis would want to trade the pullback. The nearby levels of support shown by the dotted trendlines and the 500-day moving average will all likely act as guides for setting the positions of buy and stop orders. The exact timing of the order entry will likely come down to risk tolerance and investment horizon. Extremely short-term traders will likely look to buy near $112, while longer-term traders could wait for a move toward $107 or even $103.14, which is currently equal to the 200-day moving average.
The Bottom Line
While many investors are looking for the exits based on recent selling pressure, some followers of technical analysis are taking the opposite approach and looking for buying opportunities. For bullish traders, one group that has fallen toward key levels of support and has proven to be one worthy of a closer look is U.S. regional banks.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.
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