The financials are one of the most beaten down sectors of the market. The Financial Select Sector SPDR Fund (XLF) is down 21% from its 2018 high and was down over 25% at its low last week.
Last week’s low touched the 50% Fibonacci retracement level of the fund’s 2015 low and its 2018 high. So far this week, the 50% retracement level in the $22 area has continued to act as support, and the 38% retracement level in the $24 area has acted as resistance.
These horizontal 50% and 38% retracement levels should be monitored for their ability to provide support and resistance over the short term. But there is another set of Fibonacci lines that should also be watched for their technical support and resistance potential going forward.
The blue lines that originate at the 2015 low and extend up through the retracement points of the 2015 low and 2018 high are called Fibonacci fan lines. They can also be used to define support and resistance, but unlike horizontal Fibonacci retracement lines which are static, the fan lines are dynamic, meaning they extend upward.
The XLF has a lot of work to do in order to reverse the trajectory of its downtrend. An initial step would be to move above the static horizontal 38% retracement level. The next step would be to begin trading above the rising 50% retracement level fan line.