$XLF : Great setup for a short

With news of JP Morgan making a loss last quarter and now Morgan Stanley having a cap on immediate cash bonus, XLF is clearly being setup for a great short.

Let’s review the chart.

1. We can see that on the Ichimoku Daily Chart for XLF that it is bumping into the resistance level at $14.

2. While the Daily Chart shows that XLF is in bullish territory, the last 3 candles is not showing great strength. The candles are suggesting that XLF may turn from here.

On the Ichimoku Weekly Chart, the setup is clearer.

1. Like the Daily Chart, we can see that XLF is hitting the resistance at $14

2. The key difference is XLF is still bearish on the Weekly.

3. In the coming 2 weeks, XLF will be slamming into the kumo resistance and the flat kumo top is suggesting that XLF has a higher chance of consolidating below $14.

I will be establish a SHORT CALL spread on XLF.


XLF : Possible Breakout?

XLF just had a Tenkan sen – Kijun sen bullish cross under the kumo.

Possible resistance is at 14.77


Ichimoku says : Financial is still not bullish

At the heart of the US govt. plan is to save the Financial industry and have them lead the rest of the companies out of the recession.

What I like about XLF is that it includes financial services firms with diversified business lines from investment management to commercial and investment banking.

In short, it is a good representative of the health of the Financial industry.

Look ing at the chart, we can safely say that there is no clear bullish signal from the Ichimoku chart yet (despite the recent rally).

In fact, I see heavy resistant ahead at the 9.43 level. This year, it has attempt to break through this level for 4 times and has failed to do so. There is still no short term catalyst that can reverse the situation in the banks. I believe, it willl retrace back to 7.40 over the next few weeks.