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Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target

Companies / Sector Analysis Nov 26, 2021 - 03:11 PM GMT

By: Chris_Vermeulen

Companies

The recent downward price rotation in the Financial Sector ETF (XLF) may have frightened some traders. My research, however, suggests this move is setting up a future bullish price target near $43.60 – a more than +11% move. The end of the year Christmas Rally phase of the markets should drive spending and Q4:2021 expectations powerfully into the first quarter of 2022. Unless something big breaks this market trend, traders should continue to expect a “melt-up” bullish price trend through at least early January 2022.

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The Financial Sector continues to deliver strong earnings and revenue data each quarter. The way consumers and assets prices have reacted after the COVID market collapse says quite a bit about the ability of financial firms to generate future profits. Financial firms are actively engaged in financial services, traditional banking, real estate and other investments, and corporate financing. The rising inflation trends and consumer spending activities suggest the US economy is still rallying after the COVID stimulus and recovery.


Financial ETF Sector May Rally 10% to 15%, or more, by January 2022

My analysis of Financial Sector XLF suggests this recent pullback in price may stall and start a new bullish price rally targeting the $43.60 level – a full 100% Fibonacci Price Extension of the last rally in XLF.

This Daily XLF chart shows the extended rally in early 2021 and the brief pause in the price rally between June 2021 and early September 2021. Now that we’ve entered Q4:2021 and the US economy appears to be strengthening in the post-COVID recovery, I expect that most sectors, and the US major indexes, will rally throughout the end of 2021 and into early 2022.

This recent pullback in XLF sets up a solid buying opportunity for traders targeting a +10% rally that may last well into January/February 2022 – or longer.

Longer-term Financial Trends Suggest Another Rally Above $44 May Start Soon

Over the past 6+ months, moderate rally phases in XLF have shown a range of about $4.00 to $4.50. I’ve highlighted two recent rally phases in XLF on this longer-term XLF Daily chart below with gold rectangles. I believe the next rally from the recent pullback will be similar in size and prompt a moderate upward price move targeting the $43.60 level – or higher.

Although there are some concerns related to the continuing recovery in the US markets, I believe the momentum of the US recovery and the strength in the US Dollar will push many US sectors higher over the next 60+ days. Closing out Q4:2021 and starting Q1:2022 with a reasonably strong rally that may surprise many traders.

The Financial Sector is likely to present very strong Q4:2021 revenues and earnings data as long as the global markets don’t push some crisis event or other issue that could detract from the US economic recovery. Right now, the most significant issues seem to be China and Europe.

Where The Financial ETF Sector May Go next

My opinion is that any moderate price weakness in the Financial Sector will be short-lived and will resolve into a bullish price rally, or “melt-upward” type of trend, as we move into early December 2021. Once the US Debt Ceiling issue resolves, I believe the Financial sector will begin a very strong rally pushing prices above $44 or $45 as Q4:2021 earnings expectations drive investors’ focus into Technology, Consumer Retail, Financials, and Real Estate.

The strength of the US Dollar is driving large amounts of capital into US assets and stocks right now. Based on my research, it is very likely that the US major indexes and certain sectors will continue to rally into early January 2022. If my analysis proves accurate, we may see a +11% to +18% rally in XLF before the end of January.

WANT TO LEARN MORE ABOUT THE FINANCIAL ETF SECTOR AND OTHERS?

Please take a minute to visit www.TheTechnicalTraders.com to learn about our Total ETF Portfolio (TEP) technology and it can help you identify and trade better sector setups. We’ve built this technology to help us identify the strongest and best trade setups in any market sector. Every day, we deliver these setups to our subscribers along with the TEP system trades. You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Have a great day!

Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive

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