Early last week, the KBW Nasdaq Bank Index (BKX) reached new August highs. By Friday's close though, the index had reversed and was well into new monthly low territory and looked headed for a steep sell off. As this week begins, a number of major banks are rebounding nicely. European banks are on the rise as well.

However, caution on the sector may still be warranted. 

Here's a quick look at three key components in the BKX Index. Bank of New York/Mellon (BK) is the No. 1 weighting. The stock is up just over 1% today as it continues to rebound after last Thursday's 3.9% decline. BK stock put in a lower monthly high in August and may still need more consolidation and a deeper pullback before returning to rally mode. A retest of the June high ($51.60), which is also in the area of the 50-day moving average, would offer a low-risk entry opportunity for patient investors. 

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Citigroup (C) is also moving well Monday. The stock is up just shy of 2% at midday after suffering four straight losses last week. C stock, unlike BK, reached new 2017 highs last week as its streak of higher monthly highs stretched to four straight. However, the stock did suffer considerable damage last week due to an ugly downside reversal on the weekly charts. It's likely the stock will need more consolidation, without much of a pullback, before it can continue its steady climb. The 50-day moving average has, and remains, an area of solid footing for the stock. C stock could retest this level again while continuing to put in higher monthly lows.

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JP Morgan Chase & Co. (JPM) traded much like Citi last week. JPM hit new 2017 highs on Tuesday but by Friday's close was well into new August low territory. Today shares are up 1.5% but are still under pressure from last week's key downside reversal. Shares will likely need more consolidation to repair the damage. A dip down to the 50-day moving average, which includes the July low, would offer a low-risk entry opportunity for patient investors.

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At the time of publication, the author was long JPM, C and BK. 

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