NEW YORK (TheStreet) --The financials are the only S&P 500 sector down year-to-date. ACG Analytics managing director Larry McDonald and Piper Jaffray market technician Craig Johnson discussed trading the sector during Tuesday afternoon's "Power Lunch" on CNBC.
Pointing to the situation at Deutsche Bank, McDonald says that means trouble for the U.S. banks.
"It's similar to 2008. If you look at Deutsche Bank and you think of pie. They've got $16 billion of equity and $162 billion of debt. That is an unsustainable business model. They need equity they need recapitalization. There's not the political will in Germany right now to get that done. That means trouble for the U.S. banks as a contagion," he explained.
Taking a more bullish tone, Johnson noted that the financial sector is only 40% banks, and 60% other financial institutions, and sees a 15%-20% move to the upside from current levels, based on the charts.
"It looks to me like it's a buying opportunity when I look at this XLF you can see two things technically. One you've reversed the downtrend off the July 15 highs and you're also making a classic bottoming setup," he said.