Financial Sector Stocks To Watch

JC Parets
July 27, 2018

From the desk of Tom Bruni @BruniCharting

The broad-based Financials ETF $XLF has gone basically sideways for the majority of the year, but under the surface there has been strength in individual names and sub-sectors like Broker-Dealers and Exchanges. We've spoken a lot about them in the past, so today I want to talk focus on several stocks showing relative strength that are setting up on the long side.

The first name on our list is American Express, which I've been pointing out for most of the year as a stock that's held up well. It's continued to consolidate above its 2014-2015 highs as it clears this massive 4-year base and looks poised to make new highs as long as prices are above 95.70. If we do break out of this year-to-date range, our upside price objective is 124.50.

Click on chart to enlarge view.

CME Group Inc. is another name that's been consolidating for six months within the context of a very strong long-term uptrend. If prices can close above 172.50 we want to be buyers and taking profits up near 197.25.

Suntrust Banks Inc. has exhibited a similar pattern over the last 2 years in which prices break above our upside price objective, consolidate for a number of months, and then continue higher. It looks like we're on the verge of another breakout in this stock, so we want to be buying a move above 73.50 and taking profits at 87.75.

Northern Trust Corp. is a tricky name because it's in the middle of our risk management level and our upside price target, but I wanted to include it to show further evidence that despite the sideways action of the Financials ETF, there are a number of names working under the surface.

The last name I want to mention is Intercontinental Exchange Inc. which is emerging from a 7-month base to new all-time highs. With that said, it's scheduled to release its Q2 earnings on August 2nd, so it's best to keep this name on the radar and look to trade it after that date if it's still in play.

The Bottom Line: There are strong stocks in every market segment that tend to lead if/when sector rotation puts it back into favor. As a result of short-term improvements in the broad-based Financial Sector ETF's price action, we want to keep an eye on these names as a way to capitalize on the potential sector rotation we're seeing back into Financials. In each case the risk is very well-defined and the reward/risk is skewed in our favor. If we're wrong, we have our levels that will allow us to exit with minimal losses and revisit them when the sector improves further.

Thanks for reading and let us know if you have any questions!

If you enjoyed this post, consider joining our community by starting a risk-free trial or signing up for our "Free Chart of the Week".

Allstarcharts Team

Filed Under: