By Doug Busch

Rotation is the engine that fuels a bull market, and that dynamic is playing out now as lower interest rates push capital into new areas. Regional bank stocks like Citizens Financial Group and M&T Bank look interesting.

In the chart below, the SPDR S&P Regional Banking exchange-traded fund confirms the signal of a bullish inverse head and shoulders pattern by breaking $65 -- a good entry point -- setting the stage for a potential rally toward $82 by early 2026. For context, the fund, which was trading down 0.3% at $65.30 in premarket trading Friday, has climbed 6% over the past month and 16% over the last three, outpacing the broader Financial Select Sector SPDR ETF, which rose 1% and 6% over the same periods.

Topping the fund's holdings, Citizens Financial Group has surged an impressive 19% this year, while boasting a nice dividend yield of 3.2%. The stock is riding a wave of momentum, trading at fresh 52-week highs, even as the SPDR S&P Regional Banking ETF itself remains about 6% shy of its annual peak. Notably, it has showcased remarkable resilience, declining in just 12 of the 32 weeks so far in 2025.

Citizens Financial Group, which was trading off 0.8% at $51.75 in premarket trading Friday, recently cleared resistance signaled by a bull flag, perfectly aligning with the round $50 level. This breakout sets the stage for a potential advance to the $60 level by year-end, signaling continued upside for one of the regionals' strongest performers.

M&T Bank, a premier regional player focused on the Eastern Seaboard, has gained 8% year to date and offers a solid dividend yield of 3%.

The stock, which was trading down 0.4% at $199.92 in premarket trading Friday, is gearing up for a decisive breakout above the psychologically significant $200 level, with this potentially being the third -- and first successful -- attempt after setbacks in January/February and July. A breakout above a $205 resistance level in a bullish inverse head and shoulders pattern points toward a possible advance to $260 in the first half of 2026.

Truist Financial, the third-largest holding in the SPDR S&P Regional Banking ETF, has posted an impressive 19% gain over the past three months, while offering an attractive dividend yield of 4.4%.

The stock, which has fallen 0.6% to $46.53 in premarket trading Friday, rebounded strongly from a 6% dip the week ending Aug. 1 and now trades near a six-month high. It recently cleared a cup-with-handle trigger at $46.23 on Aug. 26, and bulls will be watching for the stock to decisively distance itself from this breakout zone, which would be an encouraging sign given that the best breakouts often gain immediate traction. Current technicals suggest a potential push toward $52 by year-end.

That's a rotation we can believe in.

Write to Doug Busch at douglas.busch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

August 29, 2025 08:57 ET (12:57 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.