US Banks Set a Bullish Tone at the Start of Earnings Season

Company earnings reports for the second quarter will be a crucial driver of stock market movements in the coming weeks. Traditionally, the largest banks kick off the earnings season, and their performance indicators today are setting a bullish tone.

For example:

Bank of America (BAC), report published on 16th July:

→ Earnings per share: actual = $0.83, expected = $0.797;

→ Gross income: actual = $25.37 billion, expected = $25.22 billion;

Goldman Sachs (GS), report published on 15th July:

→ Earnings per share: actual = $8.62, expected = $8.35;

→ Gross income: actual = $12.73 billion, expected = $12.35 billion.

Other major banks, including JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC), have also surpassed analysts' expectations. Although following different trajectories, the stock prices of all the listed banks have generally been rising after the publication of their earnings reports.

Notably, the formation on the XLF chart is interesting – this is the Financial Select Sector SPDR Fund ETF, which is focused on the financial sector and includes the shares of the largest US banks. You can trade this ETF with FXOpen, taking advantage of CFD instruments.

Technical analysis of the XLF chart shows that:

→ In 2022-2023, the price was in a broad trading range of 30.70-36.6;

→ In 2023-2024, the price formed an upward channel (shown in blue);

→ The median line of this channel acts as support;

→ Rising lows A and B resemble a bullish Cup and Handle pattern.

In the wake of the successful bank reports:

→ the XLF price broke through the 42.20 level, which had been acting as resistance since the end of March;

→ the RSI indicator entered the overbought zone.

It is possible that amid positive earnings reports from other companies in the financial sector:

→ the XLF price could reach the upper boundary of the blue channel;

→ the RSI indicator could form a divergence;

→ subsequently, a correction may form on the chart as investors may wish to lock in profits from the rapid growth.