![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202303\/20230321-JMU-01_njk883.png\")
<\/p>\nThe financial sector is crashing.<\/p>\n
Regional banks are going belly up.<\/p>\n
Europe’s largest bank was forced into a shotgun wedding over the weekend.<\/p>\n
Major money-center banks in the U.S. borrowed a record amount of money from the Federal Reserve last week.<\/p>\n
And depositors are wondering if their money is safe.<\/p>\n
As a result, financial stocks have been hit hard over the past couple of weeks. The Financial Select Sector Fund (XLF) was trading at $36 per share in early March. It closed at $31 on Friday.<\/p>\n
That’s a 14% drop in just two weeks.<\/p>\n
It takes guts to step up and buy into a sector that is under such intense selling pressure. Most traders would just step aside and move to the sidelines.<\/p>\n
But one of our most reliable trading indicators just generated a buy signal for financial stocks. And based on its track record, bank stocks are likely to be higher in the weeks ahead.<\/p>\n
Take a look at this chart of the Bullish Percent Index for the Financial Sector (BPFINA)…<\/p>\n
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A bullish percent index 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 (80% of the stocks are trading in bullish technical patterns) means a sector is overbought. Readings below 30 indicate oversold conditions.<\/p>\n
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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<\/p><\/div>\n<\/div>\n <\/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.<\/p>\n 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 The blue arrows on the chart point to the buy signals over the past year. Here’s how those signals played out in the KBW Nasdaq Bank Index (BKX)…<\/p>\n <\/p>\n The BPFINA buy signals did not result in immediate, sustainable moves higher.<\/p>\n Instead, following the quick bounces after all three of the previous buy signals, BKX dropped back down and chopped around for a bit before mounting a multi-week rally.<\/p>\n But with a little patience, buying the bank stocks following the three previous BPFINA buy signals over the past year would have produced solid returns over the next two months.<\/p>\n If the same script plays out for the current buy signal, bank stocks should be higher by mid-May.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n <\/p>\n<\/p>\n![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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