NEW BULLISH Plays

SPDR Financial ETF - XLF - close 15.23 change +0.49 stop 14.45

Target(s): 15.05, 16.05, or higher
Key Support/Resistance Areas: 16.10, 15.75, 15.55, 15.00, 14.75
Current Gain/Loss: Unopened
Time Frame: 2 to 4 weeks
New Positions: Yes, see trigger

Company Description:
Financial Select Sector SPDR Fund (the Fund) seeks to provide investment results that correspond to the price and yield performance of the Financial Select Sector of the S&P 500 Index (the Index). The Index includes companies from industries, such as diversified financial services, insurance, commercial banks, capital markets, real estate investment trusts (REITs), consumer finance, thrifts and mortgage finance, and real estate management and development. (source: company press release or website)

Why We Like It:
Financials have seen two pieces of good news over the past two days. First, the QE2 program announced yesterday is targeted towards the short to middle end of the yield curve, not the long end as many thought. This should make the yield curve steeper which is likely to enhance bank profits. Second, the WSJ said today that the Fed is considering removing restrictions from allowing TARP banks to pay dividends. And this is sure to attract investors into financial stocks. More nimble traders may consider launching positions now, however, there could be a dip in the broader market so it can gather energy for another move higher. Technically, XLF broke over long term resistance at $15.05 today. We want to use this area as a trigger to launch bullish positions at $15.10. Our initial stop is $14.45 which is below the rising 50-day SMA at $14.49. We are targeting a move towards the May highs.

Suggested Position: Buy XLF stock if it trades to $15.10
Options Traders: Buy December $15.00 CALL

Annotated chart:

Entry on November XX
Earnings Date N/A (unconfirmed)
Average Daily Volume: 83 million
Listed on November 4, 2010