This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Has Tech Run Its Course?

Nothing tells the story of supply and demand better than the Money Flow Index. Demand through January for XLK was at exceedingly high levels, but it has declined over the past several trading sessions.

Other indicators confirm the declining demand. The relative strength index hit its previous high before the August selloff and has begun to retreat.

Stochastics are rolling over from an extended overbought period. The MACD signal line is about to make a bearish crossover, and the histogram looks to be heading into negative territory. Our +/- directional indicator at the bottom of the chart shows positive direction has rolled over from a high and negative direction has just turned upward.

Everything on this chart shows a tiring trend about to decline. The question is how far.

We have an ascending triangle formation by the upper and lower trend lines. Generally, this indicates fewer and fewer sellers as the lower trend line ascends. Typically it's bullish.

From the lows in August, the lower trend line was established by the late September low. That lower trend line was tested again at the December low and proved true.

On the upper trend line established from the July highs we have only had one major test at the October highs.

Although, price may appear to have broken out of the ascending triangle pattern, we may not have a true breakout but rather an overextension based entirely on AAPL's earnings.

The pattern is still wide and typically would have another test of the lower trend line before a true breakout. Additionally, a true break would not have an array of declining indicators.

So, to answer the question of how far, a retest of the lower trend line would likely be just north of $25.25 (based on trend line trajectory and rate of change). That price level would also have the support of the 200-day moving average. A bounce off the lower trend line could spring XLK into a true breakout of the $26.50 level.

XLK isn't far away from its precrash, October 2007 high of $28. If anything is going to go into new realms of an all-time high, it will be tech. Keep your eye on Apple. As Apple goes, so goes tech.

At the time of publication, Gillie had no position in XLK.

Subscribers to ETF Digest receive alerts for trades being placed in the model portfolios.

Follow my intraday commentary and various other observances on Facebook and Twitter.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.19 0.00%
IYW $101.48 0.00%
QQQ $105.05 0.00%
XLK $41.92 0.00%
FB $118.06 0.00%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs