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5 Big Trades From the Financial Sector

Federated Investors

Investment management firm Federated Investors (FII - Get Report) is showing traders the exact same pattern right now.

Like AIG, Federated is forming an ascending triangle setup, with a horizontal resistance level at $22 and uptrending support below shares. The pattern in shares isn't the most important thing about this setup, though. When you're looking at price patterns, it's important to think about them in real terms, not in terms of geometric shapes; after all, those shapes may be a good way of describing the pattern, but they don't answer why it matters.

>>10 Most Profitable Banks Trading Below Book Value

For FII, the strong resistance level at $22 is a price level above which there's a glut of supply of shares. In other words, it's a price where sellers have recently been more eager to sell and take gains than buyers were to keep buying.

That said, uptrending support at the bottom of the pattern does indicate that buyers have control of shares at lower price levels. If they can manage to spur a move above $22, it means that the excess selling pressure has been absorbed by increasingly eager buyers and that it makes sense to jump in. After all, the ideal time to buy is when sellers have gotten taken out.

Back in March, shares hit a higher resistance level at $23 (marked by the dashed horizontal line), but I don't think traders need to worry too much about hitting more resistance there. It's likely those are the same sellers who created resistance at $22, but they opted to lower their asks after the correction this Spring.

As with AIG, when the breakout happens, keep a tight stop on Federated Investors.
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SYM TRADE IT LAST %CHG
AIG $64.39 0.42%
AHL $48.10 0.02%
AXP $75.63 -0.57%
FII $33.78 0.21%
WFC $57.78 -0.16%

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Chart of I:DJI
DOW 17,613.96 -75.90 -0.43%
S&P 500 2,102.71 -1.13 -0.05%
NASDAQ 5,133.5120 +5.2310 0.10%

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