Momentum is building for a breakout in bank stocks, says Katie Stockton
Bank stocks are improving from a technical standpoint as market leadership broadens beyond technology. The SPDR S & P Bank ETF (KBE) has a fresh technical catalyst in price terms, and its relative chart versus the S & P 500 Index (SPX) has turned the corner. Within the group, Citigroup (C) stands out with bullish long-term momentum and a recent breakout that supports additional upside follow-through. KBE has broken out from a triangle pattern in a bullish intermediate-term development within the context of its long-term uptrend. The breakout is supported by positive momentum, with the weekly MACD showing a decisive upturn. This improves the likelihood of upside follow-through over the coming weeks and generates a measured move objective of approximately $75. The breakout point and the 50-day moving average (MA) are initial support near $64. Long-term support is at the weekly cloud model. The relative setup is also improving for bank stocks. The ratio of KBE to the SPX has a breakout that reflects stronger intermediate-term relative momentum, suggesting banks can outperform the SPX into Q3. Longer term, the ratio is stuck in a neutral trend, but the recent improvement supports a more constructive tactical outlook for the group. C has a bullish long-term setup on its chart. The stock is in a well-defined secular uptrend above its rising 12-month MA, and long-term momentum remains positive. The monthly MACD histogram is ticking higher, and the stochastics have a bullish “pop,” supporting more upside over the next few months. This long-term backdrop argues the recent strength is not simply a short-term bounce, but rather part of an ongoing trend. Last week, C broke out to a new 52-week high in an extension of its primary uptrend. Intermediate-term momentum is positive and expanding, supporting upside follow-through in the coming weeks toward a measured move objective of roughly $153. Relative to the SPX, C continues to trend higher above its 40-week MA as a long-term outperformer. For short-term positions, we would use former resistance near $135 for risk management. Secondary support is near $123. KBE’s triangle breakout and improving relative strength suggest banks are beginning to participate more meaningfully as leadership broadens. C offers one of the cleaner technical setups within the group, with a fresh breakout and positive relative strength trend. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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