NFTRH+; Pairs Trade (KBE & IWM)

In light of the dynamics in play in the interest rate market, one might want to watch a sector that favors rising interest rates (the Banks, given ZIRP at the Fed’s discount window) vs. rising yields out along the curve.  Even though the curve is dropping, if we assume that banks are funded near 0% their lending out across the curve would have a profit motive.

On the other side of the spectrum, the Small Cap sector tends not to like a strong dollar and rising interest rate environment as borrowing costs increase on funding.

This is a theoretical long (KBE) short (IWM) trade based on the interest rate environment and would be for your further research if it sounds interesting.  For my part, I may simply long KBE or KRE and avoid the short side for now since there is a seasonal play on the small caps in December-January.  Or I may do nothing with these items.  But NFTRH+ primarily wants to churn ideas for your consideration.

The chart shows a diamond like consolidation in IWM.  These are often thought to be reversal patterns.  In this case that would mean a reversal to down.  A rise above the November high negates that.

KBE’s chart is on the verge of a bullish breakout.  That would be self-explanatory if a breakout occurs and holds.

iwm.kbe

 A reminder that chart based NFTRH+ updates are just trade setup ideas, which may not be revisited as the parameters are already noted.  They are meant as a starting point for further research if interested.  Fundamentals-based ideas are also provided for your further research only.