At time of writing, the share price of Commonwealth Bank of Australia [ASX:CBA] is up .49%, trading at $77.97.
The CBA share price is up 11.4% this year, following the conclusion of the Banking Royal Commission and a surge after the Federal election in May:
The fact that the CBA share price has failed to break above $82 for long could be a warning sign. A low interest rate environment threatens bank margins and despite the small gain today, the CBA outlook and the outlook for the other Big Four banks is looking increasingly grim. Ignoring CBA’s superficially appealing dividend, there may be no fourth chance to break through resistance.
A brief history of the CBA share price
The uppermost resistance line on the chart above is a line that dates back to the beginning of 2018.
After a steep fall in August and September of 2017, the CBA share price went on a run up to a high point of around $82.50.
The second resistance line sits at $75.75, and dates back to the high point in July and August of 2018 following another slump.
The CBA share price smashed through this following the Federal election, and some CBA investors may have been thinking that it would be nothing but clear skies for CBA.
A quick note about the relatively simple technical analysis of the CBA share price offered here…
You see, technical analysis can be helpful for understanding the psychology of markets and the flow of money.
For stocks in a long-term downward trend or stocks that have been moving sideways, resistance can form at certain points as it marks the point at which it makes sense to get out of a stock.
Conversely, for stocks in an upward trend, a move past resistance can be the start of a breakout.
Looking at the CBA share price in particular, you would likely be up on your investment if you had invested prior to 2014–15, and down on your investment if you had bought in around its all-time high of $95.92 in March of 2015.
This is ignoring dividends of course, which are a large part of the appeal of CBA shares.
If we discount these for a moment, in the grand scheme of things, CBA shares have been trading sideways for around four years.
And the resistance in the $82–83 range could be explained by way of the following…
I.e. anyone who had bought into CBA since the start of 2018 would be looking at a loss, or at best, the smallest of gains via dividends.
The share price tried to break through this resistance three times and has been halted on every occasion.
So it appears this is the point at which people are taking a chance to get out of CBA shares.
And it is now possible that no fourth chance will materialise.
CBA gets hit with criminal proceedings, fintechs rising
CBA also announced on Friday that it had been served by Commonwealth Director of Public Prosecutions for 87 breaches of anti-hawking provisions between October and December of 2014.
Despite this, the regulatory picture has cleared up somewhat for CBA, but the macro picture is looking increasingly murky, if not genuinely concerning.
We’ve discussed the various threats to the Big Four in detail here at Money Morning.
These fintechs will likely be a competitive threat to the Big Four down the track — it’s no wonder CBA has poured US$100 million into Klarna (a Nordic fintech).
As the selling action on days where the RBA has moved to cut rates indicates, today’s CBA share price could be seen as the high-water mark in the future as money ebbs away from traditional banking.
You can get the names of three fintechs we think will eat into banking sector profits in the years to come.
For Money Morning