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 at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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