TGIF - In this morning pre-market Opening Look note, we focused on two main points: Financials and Chart Trades. Three of the five trade ideas were recognizable financial stocks, as well as two others flirting with important breakout zones.
Have a great weekend.
XLF Financials
XLF was one of just three sector ETFs to log a gain of at least 1% on Thursday, which now is being reversed early on Friday.
Nearly 85% of its components advanced yesterday, and that pushed the ETF to a new closing high. It will be trying to hold steady now, with the hope of seeing another bid develop over the near term.
More importantly, XLF will be attempting to hold near its most recent breakout point from August. We initially saw some follow-through in the days immediately after that breakout, but then the pullback earlier this week put that move into question.
Now the ETF has another chance, and seeing how it withstands today’s early negative reversal will be a big test.
Zooming out to the monthly chart, it’s clear how previous, large bullish formations — which took years to form and fire — have historically seen strong upside follow-through.
The most recent example came in late 2023.
This current setup may not be as clean, but given the preceding pause under the 52 zone, followed by the early, failed breakout in 2025 and subsequent comeback, we can see how an inverse bullish head-and-shoulders pattern has been traced out.
The next step, of course, is to extend from this current up-leg, as we’ve seen several times before — going back to 2012.
For that to happen, we need some of the most influential financial stocks to continue performing well. We recently discussed Berkshire Hathaway, noting that buying weakness in the stock has been one of the best strategies — and it has worked out quite well so far…
This is from 8/13:
“Needless to say, Berkshire Hathaway has been underperforming, but on the weekly log scale it’s clear the stock has come back to a key uptrend line — one that has supported strong bounces since the March 2020 low. Sometimes these rebounds have lasted only a few weeks; other times, much longer. This looks like a classic buy-the-dip scenario within a long-term uptrend.”
This is how BRK.B looks now:
But there are others leading the way, some of which now are close to breaking out again.
The first is JPMorgan - JPM, the second-largest holding in XLF behind Berkshire. Yesterday, the stock posted a strong 1.4% move, producing a fresh breakout.
This, too, is being threatened on so far on Friday.
Even though the target isn’t too far away at near 320, it’s worth noting that a similar, smaller pattern just a few months ago also broke out, hit its initial target, and then extended much further into early July. That history suggests this latest move could also carry further than the near-term objective if we see some follow again soon.
👉 For now, the stock must prove it can hold near current levels…
