Don't Ignore This Chart!

SunTrust Faces Technical Moment Of Truth

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SunTrust Banks (STI) looks very bullish on a longer-term weekly chart, awaiting a critical technical breakout.  But on its daily chart, there are signs of slowing momentum and overbought conditions as price resistance nears.  So what's a trader to do?  Well, let's look at the two charts beginning with the big picture:


The longer-term pattern is a very bullish inverse head & shoulders pattern that would fully develop on a pull back from the current price level.  The pattern would then confirm on a high volume breakout above 44.00-44.50.  Given that longer-term backdrop, let's now look at the shorter-term view:

The daily chart is overbought and shows slowing momentum in terms of price action (negative divergence) and declining volume.  I'd be a short-term seller of STI in the 44.00-44.50 area, but a buyer if we see a 50 day SMA test to reset the MACD because of the longer-term bullish pattern.  A 50 day SMA test would form the inverse right shoulder on the weekly chart.

Banks in general look very bullish to me and a chart of the DJUSBK was featured in the Sector/Industry Watch section of my Trading Places blog earlier today.  If you'd like to see that chart, CLICK HERE and scroll down.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More
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