KRE daily July 15th
In this previous post on the regional banking sector a few weeks ago, the case was made for a potential Head & Shoulders topping pattern forming on the KRE (Regional Banking ETF). I have continued to monitor both the KRE as well as some of the largest banks in the regional banking sector and feel confident enough to go ahead and establish an initial short position at this time. This is what I like to refer to as an “anticipatory” trade, meaning that I am shorting KRE in anticipation that the potential Head & Shoulder pattern will not only continue to develop & fully form but also go on to trigger an entry via a breakdown below the pattern (i.e.- prices move lower from here to complete a Right Shoulder & then go on to eventually break below the neckline and move considerably lower).
Initiating a short position around current levels should be considered an aggressive trade as not only is the position being establish without any clear breakout of a price pattern or “trigger”, as that won’t come until/unless prices break below the neckline, but with both the broad market as well as the regional banking sector clearly entrenched in both long-term & intermediate-term uptrends, a swing-trade entry here targeting my current preferred target around 32.00 or about a 21.5% drop, would be considered a counter-trend trade as well.
The basis for this aggressive entry is based on several factors including: the symmetry (so far) and volume/price patterns of the H&S pattern; the recent successful backtests of the primary uptrend line, which prices broke below in late April; as well as the fact that since the March 21st highs in KRE, prices appear to be in the early stages of a new (short-term) downtrend as they have so far made a lower low & a lower high.
In additional to the aggressive entry, KRE will also be added as a Short Trade Setup with an entry to be triggered upon a break below the neckline, should a fairly symmetrical right shoulder be fully formed, preferably on above average volume. There are also a handful of individual regional banks in my watch-lists at this time with increasing bearish technical developments which are not far from triggering objective short entries and may also be added as Short Setups soon as well.