Last Monday, we posted the Banking Index chart and discussed its impending breakout of a triangular pattern.

As you may recall, the implications were for a 10%+ down move if it broke to the downside.

Well, it broke to the downside, but things are never really that simple are they?

Just after the downside breakout, the Banking Index also had a historical oversold pattern show up.

To see the oversold pattern, take notice the Ultimate Oscillator level that I added to the chart. Now, I am not a huge fan of this oscillator, but it can often help identify oversold bottoms quite nicely. For instance, look at labels 1, 2, and 3 where the indicator reached below 32 (it may be hard to see because of the vertical lines).

Each occasion was a bottom for the Banking index and it moved higher from there. I mention this because the Banking Index's Ultimate Oscillator reached a level of 27.9 last Wednesday. If the pattern of the past three occurrences holds, it would infer that the Banking Index has hit a short term bottom and will move up. However, to replicate the previous patterns fully, it needs to continue moving up to over 50 on the scale now.