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.
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