Seasonal strength for the banks isn’t supposed to come in until the fall. However, I have bought this sector at attractive entry points in the fall via both the BMO ETF (ZEB-T) and via individual banks in prior summers. So I wouldn’t hesitate to move into the banks upon a positive technical confirmation. Let’s take a look at the banking sector via the BMO ETF and see if we can identify an entry strategy.
Below is a weekly chart for ZEB. You’ll note a symmetrical triangle seems to be forming since its strong selloff last fall. BTW—it might be important to note that our banks are levered to the energy sector to some degree. It’s a big chunk of our economy, and that’s why they fell with oil last fall. It’s worth noting that energy can have a secondary seasonal buy period in about a month. Thus, there may be some upside coming should that commodity play out. I noted in a prior blog that WTI needs to hold $50 to suggest it’s a safe bet. So far, it’s holding, but it is something I would watch.
Getting back to ZEB—a breakout over the 200 day MA (red line on chart) and through the top of the triangle would put that ETF around $23.50 +. Should something like that occur in the next number of weeks, in conjunction with evidence for continued support above $50 on oil – I might be tempted to take a position in this ETF or a few of its components.
Keith on BNN tomorrow Tuesday July 14
Tune in to BNN tomorrow to catch me live on BNN’s 6:00 pm call-in show. I’ll brave Toronto Pan-Am traffic to make it for the “MarketCall Tonight” program.
You can call in with questions during the show’s live taping between 6:00 and 7:00pm. The toll free number for questions is 1 855 326 6266
Thanks for another very timely article on the Canadian Banks. I seem to remember $23.50 on the ZEB to be a hurdle from an earlier blog. Since it is a symmetrical triangle I understand it could swing to the downside as well. It appears, these days, you are more often bringing up fundamental factors like WTI holding $50 ish. Noted from a news bulletin that crossed my screen “Iran nuclear deal likely Monday/Tuesday, WTI likely wont hold that level. XEG.TO, USO and XLE seem to be diving towards the March lows.
I will reserve my queries for your visit to BNN. I thought guest hosts at least get a BNN drone to bypass the PANAM traffic.
I think that would be a good question for BNN – banks are a popular topic – being that they are held by so many inventors–so try and call in to the show (mention you read the blog!) – thanks Khokon
Not the first time that you’ve mentioned using ZEB to play Canadian banks, but what about FIE ? Granted, it covers a wider field of Canadian financials– but the chart seems to move like ZEB albeit with a larger dividend.
FIE is not at all what I would want to play for the banks–its 15%+ preferred shares, 15%+ bonds, and then another chunk of insurance
The chart differs too much–its heading down while banks are within a triangle – which hasn’t broken down yet.
DO YOU SEE A SIDEWAY CONSOLIDATION ON THE DJIA ($DJIA) BEFORE WE FINALLY SEE THAT FIFTH AND LAST UP ELIOTT WAVE ON THIS INDEX?
NY COMPOSITE ($NYA):
WEEKLY MACD LINES NEGATIVE
PERCENT OF STOCKS ABOVE 200DMA NEGATIVE :(47.30)
AUGUST TO SEPTEMBER DANGEROUS (BOTTOM IN OCTOBER?)
PROJECTION DOWNSIDE AT 10,000? (ON $NYA)
AS FOR THE INDUSTRIALS:
NEW HIGHS IN MAY ($DJIA) ON THE INDEX
WEEKLY MACD LINES FALLING (NEGATIVE DIVERGENCE)
PERCENT OF STOCKS ABOVE 200DMA: (53.33)
MACD MONTHLY LINES TURN NEGATIVE (2007-2015)
MACD HISTOGRAM BARS (MONTHLY) WEAKEST SINCE 2009
GOOD EVENING AT BNN
WISH YOU DO NOT ENCOUNTER TO MUCH TRAFFIC ON THE WAY
Yes JP–lots of divergences–and yes, the DJIA is sideways much like the S&P500 is.
I don’t really follow Elliott Wave too religiously, but there is likely more to the bull market — so its your guess if that’s a final wave or just part of a bigger third wave.
I pay little attention to EWT for that reason–way too hard to measure, and not sure if it is as logical as some might think.
Hi Keith…just wondering about your thoughts on CWB…is it a buy at this time?
Sylvia–best to ask me the individual stocks not mentioned directly in the blog on BNN call-in show when I appear.
CWB is in the transport group–I am blogging on that today–check it out when I post it this afternoon