Top pick for the day - KBW Banking Index

Testing key resistances

The rebound in the KBW Bank Index (BKX) appears to be testing key resistances right now.

Will a breakout happen?

BKX, on a LT basis, has rebounded to its 79%FR of the previous 2007-2009 fall on a log-scaled chart (62%FR on arithmetic chart) and then reversed in July this year.

The index is now trading below the uptrend channel support from the 2009 lows and the support from the 2011 lows.

Hence, the odds would continue to favour the bears in the longer term.

On a daily basis, the current rebound has taken prices back up to retest the previous channel support (now resistance) as well as its 62%FR of the previous July-September fall.

With momentum looking weak at the moment, a reversal from current levels would not come as a surprise.

A sharp fall beneath the 73.21 levels would likely signal that the next leg down is underway.

A close below 69.09 would confirm that prices are likely heading to below the 60s soon.

If the index can manage a strong push above 78.70, then the odds would likely shift in favour of higher near term prices for the index, possibly a move beyond 80.87, the July high. (Read Report)

Source : CIMB Research