By Doug Busch
Despite a broadly weak and volatile market backdrop last week, bank stocks stood out as one of only two major sectors in the S&P 500 to finish higher (energy was the other). This relative strength should not be overlooked.
In a tape where selling pressure was widespread, the ability of financials to stand their ground suggests underlying demand and positioning that could become increasingly important if the broader market stabilizes.
The Financial Select Sector SPDR Fund $(XLF)$ edged modestly higher last week. While often viewed as a proxy for bank stocks, the ETF is more diversified, with top holdings including Berkshire Hathaway, Visa, and Mastercard.
The sixth largest component, Goldman Sachs, a name I highlighted previously, gained 4% last week -- its best weekly return since the last week of November. The XLF recently formed a bearish death cross, a signal that typically occurs after most of the technical damage has already taken place. More recent price action, however, suggests a potentially constructive shift. Last week's spinning top candle points to possible downside exhaustion following an early March doji, a combination that can precede near-term stabilization.
On the daily chart, a potential double bottom is beginning to take shape, with a possible bullish MACD crossover serving as an important confirmation signal for a sustained move higher. Adding a layer of support to the broader thesis, Stanley Druckenmiller's latest 13F filing, while inherently backward-looking, revealed a sizable allocation of nearly 7% to the fund. Given his reputation for rigorous due diligence and concentrated positioning, that level of exposure reinforces the growing case that financials may be poised to lead should market conditions begin to improve.
The State Street Financial Select Sector SPDR Fund was trading around $49.50 Monday.
Let's look at two names that look poised to potentially benefit.
Morgan Stanley, a global financial services firm, is up 34% over the last one year period, but down 9% year to date. The stock is down six of the last nine weeks, but it was higher 30 of the prior 41 weeks. Consider this a healthy reset now, as it is 16% off its most recent 52-week high.
Looking at its daily chart, losing the 200-day simple moving average is not a crime, as many prudent stops are placed at this long-term secular line. However, when a stock quickly recaptures it, that is a good sign. Notice the consecutive doji candles on March 12 and 13 also support a bottoming pattern against which to play with a tight stop. Notice that the stock already recorded a bullish MACD crossover. I think one can enter at $161 and look for the stock to travel toward $185 early in the second half, which would be a 15% advance from current prices. One can add to above a double bottom pivot of $177.98. Remain bullish above $154.
Morgan Stanley was trading around $165 Monday.
Citigroup, a global banking behemoth, posted a respectable 52% gain over the past year and trades 12% below its most recent 52-week high, a good showing versus peers. This is seen on the ratio chart against the State Street Financial Sector SPDR Fund, which has shown a firm uptrend since last April.
Looking at the daily chart, one can see the stock's strong relative strength. It is rare in its group because it never undercut its 200 day simple moving average, and is trading right at its 21 day exponential moving average, which signals strong momentum. Notice the successful retest of a cup base breakout earlier this month from a $105.69 pivot on Dec. 3 just above the very round $100 number. It could now be carving out another cup base as the right side takes shape and I think this stock can gravitate toward $150 by year end which would be a gain of 38% from current prices. Remain bullish above $102.
Citigroup was trading around $112 Monday.
Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 23, 2026 11:39 ET (15:39 GMT)
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