Financial Sector ETF Breakout Projects An 18% Rally

By | April 29, 2019

A nearly seven month inverse head and shoulders pattern has formed on the Financial Select Sector SPDR Fund (XLF) weekly chart. This bottoming process began in October last year and was completed by a neckline breakout this month.

The left shoulder formed after the XLF made a low in October in the $25 area, and the low that followed in December marked the head of the formation. A bounce in the beginning of 2019 took the XLF back above the $25 level, where it consolidated and formed the right shoulder.

The $27 neckline was broken earlier this month and the fund price has continued to track higher. This week it is attempting to move above a multiple year downtrend line delineated by the major 2018 highs.

The inverse head and shoulders pattern projects a measured move calculated by taking the height of the pattern and adding it to the breakout level. This projects a target price of $32 or an 18% increase in the fund price.

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