The regional banks have also been strong, and the below daily chart of the SPDR S&P Bank ETF (KBE) shows a solid rally from the October lows at $16.17. KBE has overcome the 50% Fibonacci retracement resistance at $21.97, but it seems to have stalled below the 61.8% resistance at $23.34. A daily close above this level would be a sign of strength.
There is first good support for KBE in the $21-$21.50 area with the 38.2% Fibonacci retracement support now at $20.16. The uptrend, line a, is a bit lower with the 50% retracement support at $19.38. A decline below the 61.8% support at $18.61 and the December low at $18.34 would be negative.
The daily RS line, after breaking out in December, did form a negative divergence, line b, at the recent highs. Support for the RS is not far below current levels at line c. The daily OBV also formed a negative divergence, line d, and the OBV is now just slightly below its weighted moving average. There is positive divergence support in the OBV at the uptrend, line e.
Strategy for the SPDR S&P Bank ETF (KBE): Go 50% long at $20.56 and 50% long at $20.06 with a stop at $18.28 (risk of approx. 9.9%).
Regions Financial Corp. (RF) has had a dramatic run from the October 4 low of $2.82. As the weekly chart shows, it has reached the 61.8% retracement resistance at $6.08, which was calculated from the early-2011 high. A daily close above this level would be positive. It is important to remember that RF traded as high as $37.15 in 2006.
The RS analysis shows a nice bottom formation, as it made higher lows, line g, and is now well above its rising weighted moving average. Volume action is even more impressive, as the OBV broke its long-term downtrend, line h, and is now acting stronger than prices. A pullback in the weekly OBV to its rising weighted moving average would not be surprising on a further correction.
There is initial chart support in the $5.20-$5.40 area with the 38.2% retracement support at $4.84. The much stronger 50% retracement support is at $4.50. Therefore, this support zone (line f) should be a good area to consider buying RF.
Strategy for Regions Financial Corp. (RF): Go 50% long at $4.78 and 50% long at $4.48 with a stop at $4.16.
On October 25, I recommended buying RF at $3.82, and the entry was filled on October 26. Half the position was sold at $4.82 on January 10 and the other half was sold on February 16 at $5.82.