Technical Analysis: Banking sector testing resistance

24th Jul 2009 11:19

June 2007 seems a long time ago now, and it certainly has been a long time for the banking sector, because this was the last time that the value of the sector was above its 200 day moving average. It's certainly been a long hard slog but there does seem to be some light at the end of the tunnel, however there is one last barrier that the sector needs to overcome. Since the highs in May of 4,320 the sector has pretty much traded sideways within a fairly compact range, with an area of support around the 3,650 lows of June and July. The upside resistance around 4,320 level is also reinforced by further resistance at the 4,380 highs posted in December last year. If the sector is able to overcome these resistance areas then we may well have seen the downside risks diminish significantly in the short term. There is certainly an area of significant support around the 3,650 lows, and this area needs to hold in the long term.Barclays: since the lows of January and March around the 50p area, the share price has managed to rally fairly well, but has so far been unable to break above the 324p level, which equates to a 38.2% Fibonacci retracement level of the decline from its highs of 773p to its January lows of 47p. It has tried to break above this key level on 2-3 occasions since April without any success so far. A sustained break could target a move to 410p. Pullbacks off this resistance have so far been limited to the 250p area. HSBC: like the banking sector, this stock has recently managed to cross back above its 200 day moving average, and is currently pushing against its 6 month highs between 580p and 600p. It has however been one of the better performers in the sector over the last 2 years, having reversed over 50% of its losses from 2008 after posting lows of 270p in early March. It currently has support around 480p and has major resistance around 608p, which is a key Fibonacci resistance, being 61.8% retracement of the decline from the adjusted October highs of 817p, to the adjusted March lows of 250p.Lloyds: the last time the Lloyds share price was above its 200 day moving average was in June 2007. The share price is now currently pushing against it for the first time since September last year just before the ill-advised takeover of HBOS. Having managed to find a degree of support around the 59p level it is now looking at trying to re-test the highs of early May, but needs to get above the resistance at 85p, as well as close above its 200 day average which is currently around the 79p level.With the number of brokers currently fairly evenly split between buyers and sellers the longer term prognosis looks slightly more positive than it was in early June.RBS: currently becalmed below its May highs around 51p, it has crossed above its 200 day moving average for the first time since June 2007, though this is more down to share price inertia than anything else. It has found fairly solid support at 35p, but it is still some way away from re-testing its highs. Standard Chartered: has managed to ride out the storm in the banking sector better than its peers, it has managed to recover more than 60% of the losses from its highs of 2007. A peak of 1,728p in December 2007 precipitated a drop to 554p in March this year, but it is now trading back around 1,340p. A break and close above the May highs around 1,337p opens up the possibility of a test of 1,500p while support around the reaction lows around 1,110p holds.The banking sector currently stands at an important level with a very much 2 tier system in place, with Standard Chartered, HSBC and Barclays benefitting from being completely independent, as evidenced in the recovery of their share prices with Barclays lagging slightly behind. Lloyds and RBS remain the laggards of the sector, but there is evidence that even they are clawing back ground albeit much more slowly and as long as their respective price support levels hold, then the shares should ultimately drift higher. For periodic TA updates follow me on TwitterAlso read my Investors Guide to Technical Analysis and Level 2