Trading Strategy – iShares US Financial Services ETF

Financial heavyweights JPMorgan Chase (JPM) and Citigroup (C) kicked off the third quarter earnings season on Thursday morning. Both lenders reported better-than-expected earnings and revenues, but moved lower nonetheless, tumbling 0.9% and 3.4%, respectfully.  The iShares US Financial Services ETF (IYG) fell 0.81 percent to 121.16.  Now the question is whether this is a pause that refreshes or it’s a beginning of something worse?  In fact, according to our “U.S. Market Trading Map”, Thursday’s selloff indicated an impending bearish reversal. Below is an update look at a trade in the IYG.

The graphic below is from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges.  As shown, the underlying is in a short-term bullish trend when the price bars are painted in green.  The underlying is in a short-term bearish trend when the price bars are painted in red.  The yellow bars identify period of neutral or sideways trading pattern.  Additionally, the light-blue shading represents the short-term trading range.  A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading).  Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.

Chart 1.1 – iShares US Financial Services ETF (daily)

Our “U.S. Market Trading Map” painted IYG bar in red (sell).  After a strong run of outperformance since early September, IYG peaked in early October at 122.55.  Thursday’s bearish breakout suggested that the one-week triangle pattern had resolved itself into a new downswing.  Right now follow-thought is the key.  A downside follow-through tomorrow will confirm Thursday’s bearish signal and trigger…Click here to read more.

You see, our trend-following system is very unique as it attempts to pick turns before others see them. Timing is everything and if you’ve applied our system correctly, you should have made a killing in any markets.


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