{"id":18282,"date":"2021-03-22T07:30:35","date_gmt":"2021-03-22T11:30:35","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=18282"},"modified":"2021-03-22T07:30:35","modified_gmt":"2021-03-22T11:30:35","slug":"another-sector-on-the-verge-of-a-sell-signal","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/another-sector-on-the-verge-of-a-sell-signal\/","title":{"rendered":"Another Sector on the Verge of a Sell Signal"},"content":{"rendered":"

The financial sector could use a rest.<\/p>\n

Bank stocks have been leading the market higher for the past six months. The KBW Bank Index (BKX) is up 73% since late
\nSeptember. That’s on par with the energy sector’s 75% gain over the same time frame.<\/p>\n

And, just like the situation that caused us to turn cautious on energy stocks last week<\/a>, traders might want to wait a bit before buying the bank stocks right here.<\/p>\n

The S&P Financial Sector Bullish<\/a> Percent Index (BPFINA) is on the verge of triggering a sell signal.<\/p>\n

Look at this chart…<\/p>\n

\"\"<\/p>\n

Longtime readers know that a bullish percent index<\/a> (BPI) shows the percentage of stocks in a sector that are trading in bullish technical patterns. It’s an easy way to measure overbought and oversold conditions for a sector.<\/p>\n

Typically, a reading above 80 – meaning 80% of the stocks are trading in bullish technical patterns – means a sector is overbought. Readings below 30 indicate oversold conditions.<\/p>\n

Buy and sell signals occur when a BPI reaches extreme levels and then reverses. For example, when a BPI rallies above 80 and then turns lower it generates a sell signal. When a BPI dips below 30 and then turns higher, that’s usually time to buy. At least, those are the general rules…<\/p>\n

But, each sector trades a bit differently. And, in the case of the financials, the 20-day exponential moving average<\/a> (EMA) plays a key role in this chart.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

As you can see from the chart, the financial sector got deeply oversold last September. The BPFINA dipped below 25. Then, it turned higher and generated a buy signal.<\/p>\n

That proved to be an excellent time to buy the banks.<\/p>\n

You can also see from the chart the financial sector got quite overbought in early November when the BPFINA rallied above 80. It generated a sell signal when it turned lower. But, that would have been a horrible time to sell the bank stocks. The sector has moved sharply higher since then, as the BPI chopped around and generated a number of “false” sell signals.<\/p>\n

Rather than selling the banks as soon as the BPFINA turns lower from overbought conditions, we’re better off waiting until the index crosses below its 20-day EMA. That would have eliminated all the false sell signals in November and December. The only actionable sell signal came in mid-January, just before the KBW Bank Index sold off 14%.<\/p>\n

Now, after another solid rally in February and March, the BPFINA has once again turned lower from overbought conditions. And, it’s on the verge of crossing below its 20-day EMA.<\/p>\n

We don’t have an actionable sell signal just yet. But, it’s getting close.<\/p>\n

So, just as waiting a bit before buying into the energy sector proved to be good advice last week… I suspect a little patience, when it comes to the banking sector, will be rewarded as well.<\/p>\n

Best regards and good trading,<\/p>\n

<\/p>\n

Jeff Clark<\/p>\n

Reader Mailbag<\/strong><\/h2>\n

Do you rely on patience when scoping a trade, or do you take advantage of opportunities right away?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

It’s getting close… <\/p>\n","protected":false},"author":25,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-18282","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/18282","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/25"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=18282"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/18282\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=18282"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=18282"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=18282"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=18282"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=18282"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=18282"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=18282"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}