In a recent market report dated 10/18/07, I reviewed the banking industry. At this time, the Bank Index (BKX) was trading at $102.90 and was just beginning to break down from what we chartists refer to as a symmetrical triangle.

Here’s a brief conclusion of what I stated in the report:

“The bottom line here is that you should stay away from bank stocks to avoid getting trapped from the occasional short lived buying swings. The overall downward trend is just too strong, so don’t even bother fighting it. The situation will continue to get worse before they get better.”

In the chart taken from the report below, you will see the technical triangle pattern as previously described as well as some of the key areas of support evident by the two horizontal lines shown.

Okay, let’s fast forward to today. In the current chart below, you will notice that the BKX broke down and has continued its disastrous descent since I recommended investors to stay away weeks ago.

Yes my friends, I am guilty as charged for saying, “I told you so!” My arm is starting to hurt from all the patting I’ve been giving myself on the back. But seriously, I’m merely pointing out what has happened in the past and slowly transitioning into a view of the banking industry as it exists today. In giving you an accurate picture of historic and current developments, I am providing you with the tools you need to either avoid losses, or better yet, use the information to make big gains!

Now that the first level of support has been virtually smashed, the only saving grace for this index can be found near $94.

In my estimation, the index will likely trade in the range between $94 and $102 for some time. Eventually, it will once again break down and head for $90. Looking even further down the road here, I see major support areas near $80 and $70.

Our recommendation: Wait for a breakdown below $94 and either short the BKX index or buy put options.

In my service, Volume Spike Alert, I use the same analysis on equities, with additional and more in-depth technical review. This includes the use of more powerful timing indicators and specific buy and sell points.

Also, for more information on Volume Spike Alert visit: www.volumespikealert.com.

Good investing,

Stephen Oakes
Editor, Volume Spike Alert