Apparent triangle forming in the banking index and levels to watch

The usual thinking about triangles is that price should break out of them, moving in a continuation of where price was heading when it entered the triangle. That doesn't always happen, however. A "triangle trap" can occur where price breaks the triangle and reverses back in the direction it had been moving. Now it looks like the banking index ($BKX) might be in a triangle, so we should watch how it moves. Previously I showed resistance levels (you can find my prior posts on this using the "Banking" label at right), and I've also identified a potential C=A target level approximately 41.80 if it could push higher. This index could still come out of the triangle to that level, which would also put it by its 200-day moving average (MA). The Elliott Wave count could be interesting to work out, but we do know at least that many triangles that are "standard" - where price would in this case move up again - have a target equal to the widest part of the triangle, which can look consistent with a target level like that. But what if the triangle is broken to the downside?

On my banking index chart (below) I marked a couple of Fibonacci retracement levels, one of which was already met and the other being slightly above where the BKX is now. The slower moving indicators remain where they can support another push up, but the faster-moving StochRSI looks weak on this daily chart. You'll note that the StochRSI indicator can remain "oversold" for a while as price continues to drop, so its value really is in saying whether to remain in an existing trend trade, or otherwise look to exit or to time a turn when the StochRSI turns back up again (above the 0.2 line). If the BKX breaks to the downside, we'll also have to watch whether it gets support at its 50-day moving average, and/or the lower Bollinger Band. Falling below those may give support to the Elliott Wave alternative idea that there still remains yet another fifth-wave, new low for the banks.

I've also posted below my VXO chart so you can see that it's been edging up higher. There is a natural tendency for the volatility index to jump a bit on Mondays and weaken off a bit on Fridays, but this looks like a different type of stepping up movement (jump higher, then intraday easing off, but still a definite move above the 33.81 Fibonacci level we saw tested on Armstrong's cycle time date).