XLF ETF needs to break this key level for another leg higher: Trader

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Financial stocks are paying off.

With the financial selection sector’s SPDR ETF (XLF) for its best month since April 2009, a major level investors should see, Piper Sandler senior technical research Craig Johnson told CNBC’s “Trading Nation” on Wednesday Told.

According to Pune Butler, after recovering from the 2009 financial crisis, XLF saw positive returns for four out of five.

Pointing to XLF’s chart, Johnson marked a major level that, if broken, would likely confirm another leg.

“We’re in such a bullish triangle, we’re breaking out, and from my point of view, we’re setting ourselves up for possibly one more leg if we start seeing this index above this $ 29 level Can, “he said.

XLF fell less than 1% to close at $ 28.47 on Friday. This is up more than 19% for the month, with almost 22% not making a profit in April 2009.

“I’m seeing interest rates as well,” Johnson said. “Ten-year bond yields are going up by 95 basis points, only going to put more power behind this move. And for me at the moment, I’m going to look at it, and I’m going to go for that 95-base Waiting- point move. Then I’ll be more cool and maybe have a stronger opinion on the financial sector. “

The 10-year Treasury yield fell to around 0.84% ​​on Friday. In the minutes of the Federal Reserve meeting released on Wednesday, central bank officials considered additional asset purchases to help the economic recovery.

Financial stocks not only look cheap, but have seen their margins squeeze “dramatically” based on the Kovid-19, Chantico Global founder and CEO Gina Sanchez at Lido Advisors said in the same “Trading Nation” interview .

“If you look at what happened to the financials after 2008, it took them about 24 months to actually come back to great profitability. So, we can see a way from here,” he said. “Although short-term [policy] This is not necessarily helpful to the financials, it has reduced the debt risk they might have otherwise taken during the epidemic. And so, it actually makes it more likely that they will become even more profitable later. “

Sanchez was also looking at the yield curve, which tracks the relationship between 2-year and 10-year bond yields.

“You really need to get the yield curve to be a little bit thicker. But the yield curve is growing faster,” he said. “The yield curve is beginning to reflect the end of the epidemic. Therefore, it also sets quite well. Remember, this is not exactly where you are in interest rates. It’s the short end and the long run. The difference is there. This is where banks put their money. “

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