Technical Analysis: Banks still finding upside difficult

2nd Jun 2009 16:33

Since the beginning of March, the turnaround in the fortunes of the banking sector has been quite remarkable. The lows of 1,877 seem a distant memory now after a rise of over 100%, but this rally needs to be set into the context of the decline before it.Since the beginning of May the banking sector has been unable to sustain the highs it made at 4,320, and has been unable to break above the 200 day moving average for the best part of 3 weeks now. It is currently trading in a broad sideways consolidation between 4,246 and 3,880. A break either side here should give some indication of future direction.Tuesday's news that the Arab investors, who helped keep Barclays out of the UK government hands earlier this year, have sold out of 1.3bn of their 2bn shareholdings has seen the share price, and the sector as a whole, take a dive lower as investors try and examine the motives behind this disposal at a figure way below Monday night's closing price.The reasons are probably no more complicated than a professional investor locking in profit on an investment, like all investors should do, when managing a portfolio. In doing so they are able to better insulate themselves from any adverse share price movement going forward on the remainder of the position. Barclays: When you consider that in September last year Barclays shares were trading at 475p, the recovery off the lows of 47.30p since then has been extremely rapid. The close at 316.25p was a full 62% retracement of this move down and an ideal opportunity to lock in some profit. There is potential for a correction back to the May lows of 236p in the short term after today's sell-off below the support line at 284p. HSBC: The 200 day moving average has continued to act as a cap on the share price here with the market trading in a fairly tight range with its upper boundaries between 580p and 590p, and its lower boundaries around 520p. A break either side is needed here to determine future direction. Lloyds: after the open offer the share price dipped down to the low 60's where it has found a degree of support. Rallies have been limited to around the 80p mark. A break either side is required to break the consolidation. RBS: after topping out around the 51p level the pullback has been limited to 35.80p. There is potential for the share price to slip back to around the 30p mark whilst it stays below the 40p level.Standard Chartered: the up trend remains intact on this banking stock with the trend line off its March lows currently dissecting the price axis at 1,123.90. It is finding progress difficult above its early May highs of 1,337p and is currently consolidating in a triangular pattern, with upper boundaries at 1,275p and lower boundaries around 1,204.75pEarly last month there was evidence from the charts that the banking sector may have topped out in the short term. This still looks to be the case, with the state banking sector continuing to find any upside momentum difficult and the private sector remaining quite volatile.For periodic TA updates follow me on TwitterAlso read my Investors Guide to Technical Analysis and Level 2