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 needs some real volume to press the highs.
- 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.
- AAPL needs stability.