The financial sector has been one of the market's bright spots in May, rising 3.4 percent versus a 2 percent gain for the as a whole. And one technician says the run isn't over yet.
Ari Wald, head of technical analysis at Oppenheimer, says the SPDR financial sector ETF (XLF) could be set to break above a key level, paving the way for further gains.
The XLF "peaked in December at $25. We are now moving back to that level," Wald commented Tuesday on CNBC's "Power Lunch." "Aside from what could be a pause here, we think we break through."
That's because Wald notices "a strong trend heading into this level. We're making higher lows. We have a rising 200-day moving average. So we would be playing for a breakout."
The technician predicts that the XLF will rise to $27.
Taking a fundamental tact, Erin Gibbs of S&P Capital IQ also finds cause for bullishness.
She points out that the financial sector has an expected earnings growth rate of 10.8 percent, which is the third highest out of the 10 S&P sectors, and is much better valued than the other big expected growers, consumer discretionary and health care.
In a richly valued market then, financials could serve as one of the better bets.
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