This week’s Chart of the Week features the XLK ETF (S&P 500 technology sector) after a remarkable week in large cap technology company earnings. On Friday, XLK closed just 2.30% away from its all time high during March, 2000. That being said, the technical overview of XLK is suggesting that the ETF is ready for a pullback. We are utilizing the standard deviation channel on a 90 day graph for XLK to determine a potential pullback to $57.41. After reaching a high of $62.71 on Friday, XLK reversed off the trendline indicated above and this appears to be a near term top. Additionally, the relative strength index for XLK exhibited a 22 point gap upward putting the ETF in overbought territory. To the downside, we look for $60.80 and $59.08. In the extreme case, $57.41 could be reached, however our target on this trade is the $59.08 level. Overall, we are not expecting a massive crash for technology stocks like we saw in the early 2000’s, however the sector should see a slight correction before making its next move higher.
Farewell and Trade Well,
Founder and Editor-in-Chief