National Bank Technical Analysis on Bank Notes A Period of Much Weaker Relative Return Looms

National Bank of Canada said overnight Wednesday-Wednesday that the days of strong relative bank performance ended early in the year as the chart of the BMO Equal Weight Banks ETF (ZEB.TO) and l he S&P/TSX Composite Index has peaked.

A period of much weaker relative performance is coming as this ratio chart plots a head and shoulders top that is on the verge of collapsing, National Bank said. Supplementing this formation with higher structures in the banking charts suggests a significant underweight to banks, he added.

National Bank said a failing rally on the Bank of Montreal (BMO.TO) chart signals a renewal of its downtrend that began when it breached a high of $130.00. Recent weakness broke the top again as the stock fell below $130.00.

A neutral relative performance profile will turn more negative as the downtrend accelerates, National Bank said. His price target for BMO is $110.00.

National Bank noted that the Canadian Imperial Bank of Commerce (CM.TO) hit a one-year high when it broke $68.00 in May. Big volume on the break reflects strong selling interest as the bears take control, he said.

National Bank noted that a weak rebound in volume quickly returned to resistance. His price target for CIBC is in the mid-$50s.

On the Toronto-Dominion Bank (TD.TO), National Bank said it was arguably one of the weakest major banking charts as the stock rebounded slightly from recent lows. . A failing rally returns to test support at $82.00, he said.

The highest breakdown at $90.00 on the increase in volume to the downside indicates a target of $70.00, National Bank said. He added that a larger high is forming indicating that a breakout of $82.00 could potentially lead to a target above $70.00.

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