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Key Takeaways
- The SPDR S&P Regional Banking ETF has closed higher for eight consecutive trading sessions amid investor optimism about the prospect for lower interest rates.
- The fund’s price has broken above a pennant, a chart pattern that indicates a continuation of the current uptrend.
- Key levels on the ETF’s chart that may come into play amid further upside include $57, $65, and $72
- During retracements, the fund’s price could attract support near the pennant’s upper and lower trendlines at $50 and $46, respectively.
The SPDR S&P Regional Banking ETF (KRE) has closed higher for eight consecutive trading sessions amid investor optimism about the prospect for lower interest rates.
The Federal Reserve is widely expected to start cutting its benchmark rate in the coming months. Falling rates typically boost the profitability of regional banks by reducing the interest they pay depositors and increasing lending activity.
Amid KRE’s bullish price action, we’ll apply technical analysis to the fund’s weekly chart and identify important price levels to watch out for.
Breakout Above Pennant Pattern
KRE shares moved higher between October and December last year before consolidating within a pennant, a chart pattern consisting of two converging trend lines that indicates a continuation of the fund’s current uptrend.
Indeed, the ETF broke out above the pattern earlier this month on decent volume, with gains accelerating this week. Moreover, the relative strength index (RSI) sits just below overbought levels to confirm bullish price momentum.
Monitor These Important Levels if Rally Continues
If the ETF’s price continues to climb, investors should monitor three key areas that may come into play in the weeks ahead.
The first level sits around $57, a region just above the fund’s Wednesday close where the price may find initial overhead resistance from the 200-week moving average and a horizontal line that extends all the way back to December 2016.
A decisive breakout above this area could see a move up to $65, a level on the chart where the ETF may face selling pressure near a trendline linking a series of price peaks between March 2018 and February last year.
Further upside may trigger a rally to around $72, where the price could encounter resistance near twin peaks that formed in March and May 2021 following an impulsive move higher. Interestingly, this area also sits just above a bars pattern extracted from the trend that preceded the pennant and applied to the breakout point.
Watch These Key Retracement Areas
Given the ETF nears overbought condition, investors should keep several levels in mind during periods of weakness.
An initial pullback could see a retest of the $50 level, a location likely to attract buying interest near the round number and pennant pattern’s top trendline.
A deeper retracement may spark a decline to the pennant’s lower trendline around $46, which also sits in close proximity to a multi-year horizontal line stretching back to November 2015.
KRE was down 0.6% at $56.40 in recent premarket trading Thursday.
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As of the date this article was written, the author does not own any of the above securities.