A Weekly Look at the XLK Technology Sector Oct 5

Oct 5, 2009: 10:56 AM CST

Let’s take a look at the XLK Technology Sector ETF, as it’s caught between two key boundaries and is showing an interesting pattern.  Let’s see it:

We see the XLK above from the 2007 peak of $28 per share to the splitting in half of its value to the 2008 lows just under $13 per share.

Look carefully to note that the XLK – and NASDAQ Index – actually bottomed in November, ahead of the March 2009 lows in the stock market, which showed relative strength and was a slight leading indicator of strength.

We see the powerful rally off the lows that has taken us back to the $21 per share level, but there’s some key overhead resistance to watch here.

Namely, we have the 200 week simple moving average at $21.30 per share – price failed to overcome this level on the recent swing high.

Also, the upper Bollinger Band rests at $21.49.  We also see prior price support (which – due to the polarity principle – can become resistance) also at the $21.00 per share level.

There’s also a slight flat-line (slightly negative) momentum divergence at the recent highs as well.

Taken together, this paints a picture of bullish caution, with a “wait and see” attitude to assess whether price can push beyond resistance at the $21 level – if so, it would be a stellar accomplishment that would argue for even further prices (having cleared away resistance).

If not, then expect a swing down to the $19 level to test the 20 and 50 week EMAs for possible support.  A failure to hold that level opens up an expectation for a downswing to try the $17 level.

In summary – keep focused on the $21 level as the “line in the sand” for clues as to what to expect both in the XLK… and to an extent, in the broader market.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

2 Comments

2 Responses to “A Weekly Look at the XLK Technology Sector Oct 5”

  1. BuilderBob Says:

    This also mirrors the move today in NDX, so far it's not confirming highs in SP, Dow & NYSE

  2. BuilderBob Says:

    This also mirrors the move today in NDX, so far it's not confirming highs in SP, Dow & NYSE