It's been a frustrating year for investors in bank stocks as interest rates have remained stubbornly low. But according to one widely followed chart watcher, that may soon change.
"There are too many bulls on bonds," Ari Wald, head of technical analysis at Oppenheimer, said Wednesday on CNBC's "Trading Nation." "I think that's going to go the other way," he added.
Wald bases his thesis in part on what he perceives to be overly bullish sentiment for U.S. Treasurys. Citing an investor survey, he noted that bond investor sentiment remains bullish despite the recent sell-off. Bond prices and yields move inversely to one another.
However, if rates continue rising, Wald says that bullish sentiment may soon unravel, and that could be a positive catalyst for one group of stocks: the financials.
In a recent note to clients, Wald examined a chart of the relative performance of the S&P financials sector exchange-traded fund, the XLF, against bond sentiment as measured by Consensus Inc.
The strength in bank stocks signals to Wald that "the bad news has been priced in for the financial sector, that the strong hands do not want to give up their banks." In other words, banks could be your best bet heading into the rest of the year.
"As sentiment starts to curl the other way, as expectations start to turn toward higher rates, we think the financial sector is in a terrific position to start to outperform again and break out to the upside," he said.
The financials sector has risen more than 15 percent this year, in line with the S&P 500's performance.
Others, however, aren't as bullish on the financial sector, even in the face of expected interest rate hikes from the Federal Reserve.
"I think there is a lot of support on Treasury prices where we are right now," said Bill Baruch, president of Blue Line Futures, on Wednesday's "Trading Nation."
Even though the Fed is expected to raise rates in the next year, with a hike that is all but guaranteed at its December meeting, "perception is already priced in for this, and I don't see the Fed moving faster," he said.
"Yes, we have growth, and GDP surprised, but inflation is not rising. So I don't see yields rising for the longer run, and though financials will benefit when yields do rise, I just don't see that happening right now," he added.
The financials sector was positive in Thursday trading.