Can the Regional Banking Sector (KRE) Hold its 50-DMA?

August 11, 2021

Mish's Daily

By Mish Schneider

Written by Forrest Crist-Ruiz

From June to late July, Regional Banking ETF (KRE) has been stuck within a downward trend.

Coming close to its 200-Day moving average, it was able to find some support and from there consolidated over the major moving average.

With that said, on August 6^th KRE gapped higher and closed over its 50-DMA at $65.17.

What caused the gap continues to play role in the banking sector and for that reason we should keep an eye on both symbols’ pivotal support levels.

The leading cause for the gap higher in KRE happens to be the treasury bonds decreasing and therefore increasing the interest rates.

In the chart above you can see the 20+ Year Treasury Bond ETF (TLT) gapped lower on August 6^th.

The inverse reaction caused KRE to open near its 50-DMA at $65.27 while TLT opened lower and is now close to its 50-DMA at $145.61.

For traders, KRE’s 50-DMA has become an area of support that will need to hold.

The Rapid rise has also created a breakout from the downward trend and could entice longer-term traders.

However, the main caveat would be if TLT’s can hold support from the 50-DMA at $145.61.

If it does and begins to push upwards, it could erode strength in KRE and create volatile price action.

It should be noted that these major moving averages are commonly watched indicators, and therefore hold more value as levels for symbols to interact with.

While they are not perfect support or resistance levels, they offer a general guide of where traders tend to be more bullish or bearish depending on which side the price is trading on.

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