European Bank Sector: Big underperformer

Spread: relative performance of “Y“ versus “Z” A rising chart means “Y” is outperforming “Z”. The spread says nothing about the absolute performance of either “Y” or “Z”.

8 MAY 2018

It’s hardly surprising, but the European Banks sector continues to be one of the big underperformers versus the broader market (ESTX50/ESTX600). Moreover, weakness is growing and not much is needed to turn the weekly spread into a full-swing down trend.

We strongly suggest avoiding any long-exposure in this sector. Rotating to Telecom and Energy is probably best.

  • Primary trend: neutral
  • Outlook: bearish bias growing, down trend likely
  • Strategy: rotate out of EU banks, underweight EU banks

European Banks Sector versus STX50

27 OCT 2017

Attempts to breach the key barrier at 23.10 have been half hearted at best. Total lack of dynamics, liquidity and conviction suggest sellers are preparing for a down leg. Down side potential doesn’t seem too large at first: 21.35 offers considerable support. If sellers prove strong enough and force prices below this zone, a larger correction towards ~19.50 and 18.75 thereafter becomes very likely.

Long-term performance versus the broader market has been quite poor. On the near term it is even worse, with a fresh down trend taking hold over the past few weeks. On all fronts an exit-long (if any) and big time underweight. 

  • Primary trend: neutral
  • Outlook: consolidation, trend reversal below 21.35
  • Strategy: exit-long and avoid
  • Support: 21.35 / 19.50* / 18.75*
  • Resistance: 23.10
  • Outlook cancelled/neutralized above 23.10

European Banks Sector versus STX50