Top pick for the day - XLF

Financial to be hit first?

The Financial Select Sector SPDR is an ETF that tracks financial counters in the US markets. A bearish wedge pattern is forming and could potentially be on its final leg higher

Prices pushed past the resistance level of US$25.14 yesterday, a level where in the past has provided strong resistance to previous rallies

Will this time be different? 

A push above key resistance levels is common in a stop running move. Hence, the bearish wedge pattern takes precedence as a throwover or false breakout is also common in the final leg of the pattern

As long as prices stay below the critical resistance of US$25.78, we would remain more focus on the downside potential here in this ETF. 

Falling below US$24.50 would confirm that a reversal is underway, targeting US$22.89 next

A move above the critical resistance would indicate that our assessment is incorrect and a more bullish interpretation is required

The next few days could give us a better ‘idea’ on where the financials are heading for the weeks and months ahead. As of now, our bias is to the downside barring a move beyond US$25.78. (Read Report)

Source : CIMB Research