This 'under-loved' sector could soon rally: Technician

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Financials stocks got a boost Friday after a stronger-than-expected jobs number increased the likelihood of a December Fed rate hike. And according to one top technician, the gains could just be starting.

"You could do a lot worse than the financials; in fact it's hard to do much better in this environment," said Evercore ISI's head of technical analysis, Rich Ross on CNBC's "Trading Nation."

The Bureau of Labor Statistics reported a growth in nonfarm payrolls of 271,000 for October, handily beating estimates of 180,000. U.S. banks rallied across the board after the announcement, with Morgan Stanley and Bank of America leading the surge higher.

Ross said the financials sector on the whole has been "under-loved, under-owned and over-regulated," but he said those characteristics could change as expectations for a rate hike increase.

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"You're well below prior highs here. I think that sets you up for a nice relative value trade," he said. "I think you want to be a buyer of the XLF and the financials more broadly speaking."

The financials ETF, the XLF, has lagged the broader market this year, and is hovering around the flat line for 2015. Ross said the chart looks constructive though, pointing to a "double bottom base of support" and a "breakout above the 200-day moving average."

Technicians often look to moves above the 200-day moving average as confirmation of a stock's direction.

Gina Sanchez of Chantico Global agreed that a rate hike would be "great news for the financials," but cautioned investors to "know what you own" before buying the financials ETF.

"The XLF also has REITs in it, and REITs are actually very sensitive and they have been selling off," she said, pointing to exposure within the ETF to real estate investment trusts.

The XLF closed higher by 1 percent on Friday, and is up more than 7 percent in the past month. Banks comprise more than 16 percent of the S&P 500, making it the second-biggest sector behind tech.

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