Trend: The recent bounce in XLF may be due its oversold condition and pessimism.
Vinny Catalano at InvestorsInsight Publishing applies his Mega Trend analysis to the XLF ETF. He uses 50 and 200 day moving averages to determine the long-term trend.
Bottom fishers, short term traders, and market timers aside, some investors might be tempted to conclude that the sell oil/buy bank stocks trade is a sustainable trend. If, however, an investor takes a step back and utilizes one of the most consistent longer term technical analysis tools a decidedly different conclusion would be reached.
To illustrate, take a look at the accompanying chart for Financials (XLF).
The technical analysis tool I am referring to is called the Mega Trend. The Mega Trend (as I define it) is a multi-year stock price trend analysis where price and two moving averages (50 day and 200 day) are measured. In well-established Mega Trends, price is above (or below) its moving averages, the shorter term (50 day) Moving Average is above (or below) the longer term 200 day, and both moving averages are pointing in the same direction, either up or down.