Financial ETF Nearing Resistance

12/11/2009 12:01 am EST

Focus: ETFS

Corey Rosenbloom

Founder and President, Afraid to Trade

The daily and weekly chart of the Financial Select Sector SPDR ETF (XLF) is nearing a key support area in the $14.00 zone.  This is an ETF to watch closely in the days and perhaps week ahead.

A wide array of diversified financial service firms are featured in this sector, with business lines ranging from investment management to commercial and investment banking. Among the companies included in the Index are JPMorgan Chase, Wells Fargo, and Bank of America Corp.

The level reflects support from the convergence of the 20- and 50-week exponential moving averages, along with prior price support at the $14.00 area and the 38.2% Fibonacci retracement from the July lows.

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Watch out for the possibility of a head and shoulders forming, which would be confirmed with a break beneath $14.00.
Watch out also for a similar reversal topping structure, that of the rounded reversal or “price arc” that also appears to be forming.

Like the S&P 500, negative momentum and volume divergences are forming, which hasn’t produced a turnabout yet.

A break under $13.75 would be a major sell signal that should be followed very closely.

Be careful with all these storm clouds gathering on the horizon!

By Corey Rosenbloom of

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