Australian Banks

With the results of the banking Royal commission now in public view, in the days and weeks ahead there will be the mandatory review by the banks along with the overseeing regulation agencies of ASIC and APRA. Yet in the end, it appears lenders have not suffered as badly as they might have. As hinted in his interim report, Commissioner Kenneth Hayne largely recommended the implementation of rules that already exist. He did not challenge banks' current structures – their ability to make and sell financial products – or their lending criteria.

Investors have wiped more than A$60 billion from the market value of Australia’s four largest banks over the course of 2018.

The first real redress from the banks will come in the form of CBA reporting on February the 6^th. Part of CBA’s first response to the Commission report is to change their fee structure around financial planning from an ongoing levy to a fee for service model.

Investors saw the 4 cornerstone banks decline 25% from the May 2017 highs. But the decline started well before the Royal commission, right? You may remember the Royal commission was announced in November 2017 after the Prime Minister Malcolm Turnbull received a letter jointly signed by the 4 banks themselves suggesting a RC would be in the public interest. So it is possible the investors and traders saw something much bigger than the RC affecting the banks profit margins. Are declines in the property markets and a decline in Business confidence (National bank survey) bigger issues for the banks’ profits?

When applying trend and price analysis it is done with the belief that the charts are the source of truth rather than media and financial research based on last reports.

This observation brings a very different dynamic to the analysis of the banking sector.

Taking a look at the WEEKLY charts for the CBA, WBC and ANZ may offer a better picture and opportunity for the longer term traders outside of dividends.

CBA

Taking a 2 year look at the CBA weekly chart, recent price lows around the $66.00 level has been followed by a series of higher lows (1,2,3). With this week’s bullish engulfing range already displaying a lower low and higher high from last week, current closing price is above the $73.00 resistance level. However the long term down trend line remains in place and may be an area of profit taking in this short rally from the lows. To see a price breakout a weekly close over the down trend line and a continued rally towards higher resistance shown at $76.74 would change the underlying primary down trend to an UP trend.The relative strength indicator has remained positive during the rally from the lows as indicate strong price momentum as it remains over the key 50 level.

WBC

The 2 year chart view of WBC shows the significant support level at $27.20 broken during September 2017. Further price declines ended with an Outside period up (OPu) this type of engulfing candle has a high incidence of marking significant turning points in price movement. This week a new higher low (HL) is in place with a further breakout of the short downtrend line. The Higher low is the first sign of a potential primary up trend developing, historical resistance is shown at $28.00 and $30.50, these will be key levels to exceed in the coming months to reinforce a bullish view.

ANZ

The ANZ Weekly chart shows the underlying weekly price levels have not made new lows over the past 2 years. Key support at the February 2016 level of $21.60 has not been challenged in the current environment, an important consideration as this shows an unwillingness of sellers to take the price to new lows. As with the above bank charts ANZ has posted a new Higher low (HL) with this week’s price range an Outside range (OP). The long term down trend line may provide resistance in the coming weeks, and should be monitored as a significant milestone on any breakout higher.