Bank shares battle: Lloyds vs Barclays

TL;DR

The long-term charts of Barclays and Lloyds show textbook Elliot waves, indicating potential profit-taking on long positions and the possibility of establishing short positions. However, recent rallies suggest more upside for Barclays, especially if bond yields rise.

Transcript

hello it's John Burford with chart of the week for Monday the 16th of December and I'm covering today Barclays and you're wondering who Barclays here's Lloyd's yes uh-huh well I think I'll just introduce the Barclays chart with the Lloyds chart it's obviously the one of the other major UK high street banks and the long term chart in Lloyds is very ... Read More

Key Insights

• 🧘 The long-term charts of Barclays and Lloyds exhibit textbook Elliot waves, suggesting potential profit-taking on long positions and the possibility of establishing short positions.
• 📣 Recent rallies in Barclays indicate more upside potential, especially if the gap in the chart can be maintained as an open gap.
• ✳️ Traders often wait for pullbacks before going long, reducing risk and increasing the chance of a lower-risk entry.
• 😮 The target for Barclays' potential gains is around the 220 area, with even higher potential if bond yields rise.
• 📣 Maintaining the open gap in Barclays' chart is significant, as markets tend to close gaps, indicating the potential for further gains.
• 🏦 Positive developments in bond yields would be viewed as bullish for banks, improving their earnings which have been impacted by central bank actions.
• 😮 Bond yields rising would particularly benefit European banks that have been squeezed by negative rates.

Questions & Answers

Q: How do the charts of Barclays and Lloyds indicate potential profit-taking on long positions?

The long-term charts show textbook Elliot waves, with a five-wave rally followed by a three-wave down pattern. This suggests it may be time to take profits on long positions and consider establishing short positions.

Q: What is the significance of the recent rally in Barclays?

The recent rally in Barclays, particularly the gap above the upper trendline, validates the position of those who went long. It suggests the possibility of more upside, with a target around the 220 area.

Q: How do gaps in charts impact trading decisions?

Gaps in charts, such as the one in Barclays' chart, are often considered significant. If the gap can be maintained as an open gap, it indicates the potential for further gains. Traders often wait for pullbacks before going long to reduce risk.

Q: How do bond yields impact the outlook for banks?

Banks, including Barclays, have been negatively affected by central bank actions and low bond yields. If bond yields rise, it would improve bank earnings, making the market look upon any improvement in bond yields as very bullish.

Summary & Key Takeaways

• Both Barclays and Lloyds show textbook Elliot waves, with wave patterns indicating a potential three-wave down for profit-taking on long positions.

• The recent rally in Barclays suggests more upside, with a target around the 220 area and greater potential if bond yields rise.

• Maintaining the open gap in Barclays' chart could lead to further gains, especially if bond yields improve.