Disclaimer

A previous post compared charts of the XAF (Australian 50 Index) and the XSO (Small Ordinaries Index).

This post looks at the Financial Sector from a technical perspective only. The opinions expressed should not be relied upon in making investments decisions, for which appropriate professional advise should be sought.

Financial stocks (XFJ)  from 12 year monthly chart

TA Observations

• Similar configuration to that of the XJO (ASX200 Index)
• Pre GFC high of 7556.9 was attained in November 2007
• Post GFC low was 2524.8 in March 2009.
• GFC decline was 66.6% (similar to that of the XSO second tier stocks)
• Formed a double top with peaks at the 50% retracement level in October 2009 (just 7 months later) and in April 2010
• This was followed by a second leg decline in the 2H 2011 to the 23.6% Fibonacci level.
• 2013 proved to be a year of exceptional gains with the index rising 1122 points or 23.6% for the year, to exceed the 61.8% Fibonacci level
• Extrapolation of the existing trend line is projected to reach 7000 in 2014.

In Summary

The financial sector was more severely hit by the GFC than the other blue-chip stocks, in fact to the same extent as the second tier stocks.

The rebound after the GFC however has been similar to the other large cap stocks.

The large movement of the share-price of the index in 2013 has led many to consider them over-bought.

With a fully franked yield of 5-6% the sector remains attractive especially to retirees, and may well show further growth in 2014.

Categories: Chart Analyses, Investment, Technical Analysis, Trading opinion

Tags: Fibonacci, Market trend