NAB's Short Lived Catch Up?

Over the past four years, NAB has generally stayed range bound, in between its 21.6% and 38.2% retracements of its all-time high of 44.84 set in November 2007. Recent price action has taken NAB back to the cusps of the 21.6% retracement level of 26.92, with the bulk most recent rally coming in the last 5-6 weeks. This has seen NAB somewhat catch up to the other big four banks which intially led the recent bank rally.

A quick look at the weekly chart may reveal a trader’s paradise at first glance. The adage of “if it ain’t broke, don’t fix it” may apply once again here if historically strong resistance at 26.92 causes another top.  Currently, we see a short opportunity presenting itself with a juicy risk-to-reward ratio. Bears may look to the aggressive target of around 22.69, the 21.6% retracement level, with first resistance likely seen before this at the rapidly increasing 10WMA. 

As a sidenote, it may be prudent to wait for the MACD to flash a bearish signal, as it has yet to show signs of slowing. We would be looking to place stops at around 27.60, slightly beyond the resistance of the upwards channel dating back to September 2011.

On the daily chart, the overhanging resistance from the April 2010 high seems to be another pivot point. If support is breached and prices fall through 26.00, we may see a pullback towards the low 25 level. One thing also to look for is a potential golden cross of the 50DMA & 200DMA – a factor for bulls to hang their hats upon.