What It’ll Take for the Financial Sector to Break Out of This Pattern

[Trading With Larry Benedict]( Larry’s Note: I’ve been working on a very special project… a way for you to potentially earn 750% more yield than the typical savings account… and 998% more yield than big dividend stocks… without buying options, stocks, crypto, or anything else you’ve probably heard of. I’m almost ready to reveal this project… and I’m preparing a briefing for my readers to tell them all about it. Keep an eye out for the official invitation, which will be heading your way soon. And in the meantime, please save the date for this upcoming briefing. With inflation eating away at our savings and few good places to turn, this special project isn’t something I want anyone to miss. [Add To Your Calendar]( What It’ll Take for the Financial Sector to Break Out of This Pattern By Larry Benedict, editor, Trading With Larry Benedict After rallying 32% last year, the financial sector has been much tougher for investors in 2022. It initially held up well at the start of the year. But the heavy selling that swept the market as the year went on eventually pulled down the Financial Select Sector SPDR Fund (XLF). By the time XLF bottomed out mid-year and began to build a base, it had lost nearly 30% of its value. Yet it rallied from oversold levels through June and July. That saw XLF break above its May high. However, that momentum dried up and then reversed in August, and XLF was soon back at its yearly lows. [When we last looked at XLF]( in October (red arrow on the chart below), XLF had just retested and bounced off that base. After subsequently retesting and holding that level again, XLF then rallied to match its August high. However, now XLF is struggling to hold that level. So today, I’ll discuss what’s coming next… Recommended Link [Rich people don’t feel inflation because of THIS investment]( [image]( Ultra-high-net-worth individuals – that’s anyone with $30m in wealth or more – have HALF of their wealth in this [asset class]( That’s right. Fifty cents out of every dollar they own is parked in [THIS asset](. And it’s literally THE best way to outpace inflation. The sad thing? The average person has ZERO exposure… Yet one of America’s top investors is on a mission to change that. To discover how to get started with this inflation-crushing asset, starting with $50… [>>Click here now!]( -- Will Support and Resistance Hold? The long-term 50-day moving average (MA – blue line) in the chart below shows us that XLF is essentially a chart of two halves… First, its downtrend started to accelerate in mid-March. Second, a sideways pattern began to emerge and build from August onward. Take a look… Financial Select Sector SPDR Fund (XLF) [Image] Source: eSignal As you can see by the shorter-term 10-day moving average (MA - red line), XLF has made multiple countermoves within both major trends. However, I’m going to concentrate on the action within the current sideways trend – that is, between support and resistance (upper and lower orange lines). We know that the longer a support or resistance level holds, the stronger those levels become. And it becomes a bigger deal when those levels are broken. [#1 Expert on Seeking Alpha reveals: The SWAN Retirement Blueprint]( The chart shows that XLF tested its support level (lower orange line) numerous times – in June and July, and then again from September through October. And in all those cases, that support level ultimately held… XLF then went on to rally as the Relative Strength Index (RSI) trended higher and bullishly broke into the upper half of its range (red lines). Take another look below… Financial Select Sector SPDR Fund (XLF) [Image] Source: eSignal The rally in August then peaked and reversed (A) when the RSI formed an inverse ‘V’ and retreated lower. With this current rally (B), I’m looking to see if that pattern repeats because that could present us the opportunity for a potential short trade. However, while support has been tested and held numerous times, we don’t yet know how strong resistance is (upper orange line). So what am I looking for around here? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. We Need to See a Clear Reversal Since reaching its August peak again at ‘B,’ XLF has struggled to maintain that price level so far… For XLF to transition from a sideways pattern into an uptrend, it’ll need to break clearly above resistance. And that brings us back to the RSI… After reversing near overbought territory, the RSI has drifted lower this past week. For XLF to break resistance, we will need to see the RSI begin to track back higher. The longer the RSI can track in the upper half of its band without a clear reversal, then the chance of XLF breaking higher will increase. However, if momentum continues to wane, then we know that XLF has peaked for now. That would mean XLF will likely remain in a sideways pattern. The RSI slumping back down through support (green line) and into its lower range could then see XLF retesting its long-term support – once again. Regards, Larry Benedict Editor, Trading With Larry Benedict Reader Mailbag Do you think XLF will continue to trade sideways for a while? Or do you think it’ll soon break out? Let us know at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [Invest Less Than $100… Collect 390% Gain… In 27 Days… (Next Trade Incoming)]( Trade ONE stock… ONCE per month… and walk away with massive gains? Trading millionaire Jeff Clark says he’s done it for years… helping over 170,000 folks discover how to turn petty cash into big returns – in ANY stock market condition. 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