Banking index - and Citi - struggling to break out of multimonth range

The banking index has continued to struggle within what's turned out to be a multimonth range. And Citi (C) in particular has been rolling a series of waves in the $3 range since it never actually broke out. Yesterday there were rumors and news of unusual options activity on Citi. Today the banking sector was down. It's been struggling ever since it fell into this range.

Technically it helps that the $BKX has pushed over key moving average levels. Yet the indicators don't guarantee it'll break put of the range to the upside. I'll admit I harbor a suspicion that the banking indexay push higher to challenge higher Fibonacci retrace levels. It would take a seriously good move in Citi to breathe life into purchased call options. But it can happen. If the $BKX makes a new high then some of the Elliott Wave counts would have to change.

There's also a risk that a breakout would be temporary, and turn into a fake-out. Mainly I want to caution that it may not be a good idea to be aggressively short this sector. It can lose support, go under its 50 dma, and head lower. But the possibility of a surprise breakout also warrants attention; as does the possibility of a breakout pulling in new buying, only to reverse.

Some may see a bearish h&s forming. But if it doesn't fall under its early February (and then November and December) lows, it's still possible we may see a pop upward. (Even if it later proves to be a pop and drop!). Botom line - buy or hold on a move over monday's high and/or the January high. If short, use those areas as stop levels. Conversely, a move under the lows of last week and especially early February would be expected to trigger some more selling.

Another possibility is that this sector stays range-bound through next month. If that happens, then it's possible that it will have worked off more pessimism and be ready for a test higher into May. Depending on your trading timeframe and style, it might be worth taking a cautiously optimistic stance, maybe after another few weeks (unless it breaks out sooner). I'd almost rather the $BKX consolidate some more before breaking upward. But I'm getting a funny feeling that it wants to try breaking upward - or perhaps downward - sooner. The interesting thing is that the regional banks sector looks stronger and may provide the technical strength for an upside surprise. No guarantees - let's just be prepared in case.