XJO: The Big Four Banks

Australian banks remain under pressure due to concern about their exposure to the property market given the perception of a potential growing property bubble. There is often reference to the ‘Big Four’ and this includes CBA: the Commonwealth Bank, WBC: Wesptac Bank, ANZ: Australian and new Zealand Banking Corporation and NAB: National Australia Bank. In this post I take a look at the charts of these four banks and note any potential trading opportunity from these beaten down levels.

The ‘Big Four’ banks make up 26.69% of the XJO index; an index of the top 200 Australian stocks and this is a significant percentage:

BANK % weight of ASX-200
CBA 9.05%
WBC 7.40%
ANZ 5.15%
NAB 5.09%
Total 26.69

It would be of no surprise then to see that the XJO stock index is struggling in tandem along with the Big Four banks:

XJO: ASX-200 weekly: this has a bit of a Bull Flag look to it but the monthly support trend line has been broken which is bearish. The 5,000 level is an obvious S/R region and one to watch in coming sessions. However, it would take a break below the bottom Flag trend line, down near 4,700, to really confirm that bearish sentiment has arrested this index:


XJO: ASX-200 monthly: The 4,700 level is down near the 50% fib of the monthly chart’s more recent swing high move. However, the magnetic 61.8% fib is near the monthly 200 EMA and down further near 4,250 so would also be on my radar if bearish sentiment continues:


The Big Four Banks

So, how do the charts of the Big Four banks look? They are all under pressure, like the index they contribute to, and are down testing key S/R levels. The Big Four banks make up a significant percentage of the XJO index and, as such, are attractive trading entities for superannuation and investment funds etc. There are some reports noting that due to this large market presence that they are simply too big to fall too far. This depressed trading activity is, therefore, making them look rather attractive for any potential bounce activity.

CBA weekly: much like the XJO:ASX-200 index this also looks to be forming a potential Bull Flag. The $70 level looks to be decent S/R and near the bottom trend line of this Flag so worth watching for any make or break activity.  Any close and hold below $70 would bring the $60 level into focus as this is longer-term S/R. Keep an eye on the Flag tend lines and the $70 and $60 levels for any make or break activity:


WBC weekly: there is also a bit of Flag pattern forming up here too. The $27 level is near the 50% fib and is also long-term S/R making this a key level to watch. Any close and hold below $27 would have me watching the $24 region as this is the 61.8% fib and also S/R of some note. Keep an eye on the Flag trend lines and the $27 level for any make or break activity:


ANZ weekly: It’s a bit of a stretch to call this a Flag as it is rather more a descending trading channel. The $20 level is major S/R but below the 61.8% fib. Any test of $20 would be very enticing to buy. Keep an eye on the channel tend lines and the $20 level for any make or break activity. 


NAB weekly: As with the chart of ANZ there is a descending trading channel here to monitor. The $25 level is long-term S/R here but this level falls in the middle of this channel, as well as between the 61.8% and 50% fib levels. Keep an eye on the channel tend lines and the $25 level for any make or break activity. 


Summary: The Big Four banks make up around 26% of the Australian ASX-200 stock index and are attractive trading entities for Superannuation funds. The four of them are trading down near major S/R levels making them look attractive for any potential bounce trade. Traders of these entities should watch these key levels for any make or break activity to help gauge the next trading direction with these stocks.

NB: Thank you to Greg McKenna for help sourcing data for this aricle.

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