Forget gold's crazy run — let's talk about a different kind of gold rush – “Golden Crosses.”
Picture this: the 50-day moving average doing a victory dance as it crosses above the 200-day moving average, signaling a hot, new long-term trend in a stock or sector.
Guess what? Regional banks just had their first Golden Cross in over three years, signaling that this may be the next hot sector for the market.
Despite being the market's Achilles Heel since February, regional banks (aka the underdogs) are now riding a bullish wave, thanks to a lack of bad news and hopes of lower interest rates. The Regional Bank ETF (KRE) is now a breakout star of this market.
Let’s flashback to November 10, 2020, the last time KRE shares did the Golden Cross.
The result? A monster 50% rally in three months and another 27% in the following three months.
Could it happen again? Certainly!
This time, lower interest rates are beneficial for smaller regional banks, increasing their main revenue source – loan volume.
The sector's unpopularity in 2023 creates an opportunity, as analysts and investors remain hesitant to embrace regional banks. I love “uncrowded trades” like this.
The KRE is poised for a strong start in the new year, with the current trend favorable for investors. As negative sentiment melts away, the sector's profit potential may attract more attention.
Bottom Line: The Golden Cross in the KRE suggests a strong start to the new year. Lower interest rates and the sector's underappreciated status present an opportunity for investors as sentiment warms up to the profit potential in regional banks.
Stay tuned, you’ll receive a few names to watch on Friday.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.