XLK ~ Technology ETF and the lack of progress.

I want to revisit the set up in the Technology ETF and the lack of momentum compared to the $SPX. Basically, the chart below maps the major technology ETF that holds a majority stake in the one and only AAPL. This stock is dominating the XLK movement. But the underlying stocks in the XLK have shown strength along with a new spirit in the Semiconductors and the SMH ETF. (See my post from November addressing the new SMH action:   http://wp.me/p2oNy1-2m. Thanks in part to QCOM, BRCM, ARMH and MXIM.

I’m looking for XLK to grind through these levels and test 29.50 again (11/02 was the last time XLK tested 29.50) but this was after a downtrend and a dead-cat bounce to hit the 29.50 level. So this level is now our resistance we need to work off in order for XLK to break out and join the party to 30 and above. It’s obvious the levels of resistance stem at each .50 cent intervals which makes it easy to scope out potential targets if we can get this technology ETF to bust out. In perfect set up, I’m looking for a gap up through 29.50 on volume, a pullback to test and another gap up /pivot to close above 29.50 as an entry of addition to a long side trade.  And then make the way to 30+. Since AAPL dominates this action, we need to look for stability in AAPL prior to really getting excited about a long side trade. But at the level XLK is at now, can offer a nice swing trade risk : reward picture with a stop loss placed under the 200 ema at 29.80.

XLK Chart by Lightspeed

XLK Chart by Lightspeed

Bottom Line:

XLK needs some real volume to press the highs.

  1. XLK need a gap with volume to clean the 29.50 and hopefully 30 kind the same day. So it needs some expansion in the ATR or a range expansion day.
  2. AAPL needs stability.

About Nickolas Pirraglia

Nick Pirraglia started his career in trading in 1991 after returning to the US as an Army Officer deployed in Iraq. He began as a bond broker and worked his way into trading. Expert mentoring, hard work and a disciplined approach to the markets has allowed Nick the ability to maintain a very successful career in Capital Markets and Trading for over 20 years as a professional OTC Market Maker and independent trader. Nick has also managed the trading desks for a two Dallas based capital management companies and traded equities for a Dallas based hedge fund. Nick has trained and mentored thousands of customers in the rigors of trading, technical analysis and risk controls. Recently, Nick had broadened his market experience through the design and product management of two automated trading platforms. He has the pleasure of working with some of the brightest minds in the trading community and has collaborated with experts in data, design, engineering and trading psychology. An avid long distance runner, Nick completed several marathon events, qualified for the Boston marathon, completed several long distance Triathlons to include finishing a full Ironman triathlon.
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2 Responses to XLK ~ Technology ETF and the lack of progress.

  1. Did you newsletter technician McClellan’s presentation on cnbc comparing AALP to RCA and MSFT? Says highs are in, heads south for several years? if so, XLK not a good vehicle to capture Tech move. No idea if he’s right, but AAPL made him look smart last few days, resistance at 548? DTL.

  2. I wont get caught up in all these AAPL top – bottom pickers and Guru’s advice,, but technically its ripe for a 400 level move. In the blog I sent the level of failure for XLK and we must honor it for sure since AAPL is 18-19% of the XLK weighting.

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