Last Friday, the Regional Banking Sector ETF (KRE) closed underneath its 200-day moving average. This can be seen in the above chart, with the green line showing the 200-DMA.
However, while this was a key area to hold, KRE has now dipped into a support area illustrated by the black line. This area has 2 main support points, one on 3/7 and the other from the close of 12/20/21 at $66.81. We should watch for this price level to hold and for KRE to clear back over its 200-DMA at $69.37.
With that said, momentum is also at a pivotal point. In the above chart, Real Motion is sitting on its lower band. The previous dip in this price area on 3/7 showed Real Motion breaking below this band while the price held support. This time, the band was not broken, showing potential strength in the regional banking sector.
With that said, this gives us a low-risk trade setup, since both momentum and price are very close to their support. If the trade fails, we can take a quick loss and wait for another setup. While buying KRE is an option, we can also look for trades in its holdings.
Silvergate Capital (SI) is one holding that is showing more strength than weakness and has Real Motion about to clear over its 200-DMA. If the regional banking space can make a quick turnaround, SI could be one company that leads the way higher.
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- S&P 500 (SPY): 447 support.
- Russell 2000 (IWM): 209 pivotal.
- Dow (DIA): 350 pivotal.
- Nasdaq (QQQ): 369 to clear and hold.
- KRE (Regional Banks): 66.81 to hold.
- SMH (Semiconductors): 266.81 to hold the 50-DMA.
- IYT (Transportation): Needs to clear back over 261.
- IBB (Biotechnology): 127 main support the 50-DMA.
- XRT (Retail): 77.86 to clear.
Assistant Director of Trading Research and Education