The Financial Select Sector SPDR (NYSE: XLF) has rallied over 40% from its low on March 6 through to last Thursday’s higher opening. The price action last week has triggered a half-day buy signal, which means that it should make at least a three-wave move to the upside.

This week’s movement is Part 1 of the Elliott Wave Theory.

When the Wave 2 pullback begins, it should trade below its recent high for nine trading hours or more before Wave 3 takes it up to new recovery highs. The daily chart is also set up to give buy signals, but that could not occur until today (Monday) at the earliest.

For more, take a look at the chart below…

As you can see, the 50-day moving average happens to coincide with the top of a trading channel drawn from a high point last September. Both these technical tools currently show the $9.05 area as a significant level.

If XLF undergoes a decent pullback, short-term traders could try the long side with an upside target of $8.60 or better.

However, if the stock can manage to close above the $9.05 level a couple of times, there’s a good chance that the daily chart will trigger buy signals and we could see additional movement to the upside.

Source: Ticker Of The Week: Financial Select Sector SPDR (NYSE: XLF)