The More Extended, the Better the Look

Recall the high volume breakout that the financials saw back in mid-March of this year. The XLF ETF had been working through a five week tight base prior to the breakout. Since pushing higher, though, the finnies have largely been backing and filling. If you think it is hyperbole to say that holding the $15 breakout level is important, then you might want to consider extending out the resistance trendline from which the financials broke out in March. One of the most overlooked tools in technical analysis is extending out a trendline that the market has reacted to multiple times.

As you can see on the super zoomed-out chart below, $15 was critical support last summer. Upon breaching it, we saw a violent crash. As we also know in 2012, $15 was firm resistance before the high volume breakout. The strong buy volume leads me to below we will not lose it this time around in a 2011-style swoon, even if we do breach it. However, as has been the theme of my posts recently, I am not interested in fighting a corrective market by being complacent. I am just going to have to watch $15 and see if buyers present themselves in a meaningful way, yet again.
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