{"id":20432,"date":"2022-12-12T07:30:56","date_gmt":"2022-12-12T12:30:56","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=20432"},"modified":"2022-12-12T07:30:56","modified_gmt":"2022-12-12T12:30:56","slug":"why-the-tech-sector-is-still-at-a-crossroads","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/why-the-tech-sector-is-still-at-a-crossroads\/","title":{"rendered":"Why the Tech Sector Is Still at a Crossroads"},"content":{"rendered":"

On November 21<\/a>, I warned that the technical setup in the SPDR Technology ETF (XLK)<\/strong> could result in the exchange-traded fund (ETF) breaking lower.<\/p>\n

Finally on December 1, XLK put in a top.<\/p>\n

Since then, the ETF has sold off by as much as 6%.<\/p>\n

My original analysis made use of two important moving averages (MA)… the 100- and 200-period MAs, which typically form strong resistance and support zones.<\/p>\n

And that’s what happened on December 1…<\/p>\n

First, let’s take a look at the price chart I showed at the time…<\/p>\n

\"Chart\"<\/div>\n

The market was just entering the resistance zone between the two moving averages (blue and green lines).<\/p>\n

XLK couldn’t break through this zone and sold off instead.<\/p>\n

Now, the next step is to identify where the market might find support.<\/p>\n

It stands to reason that if we can use MAs to forecast resistance in the market, then we can also use them to identify potential future support.<\/p>\n

So, let’s look at a current price chart of XLK so I can show you what I mean…<\/p>\n

\"Chart\"<\/div>\n

The price action has visibly struggled to break past the 100- and 200-period MA (the resistance zone I mentioned earlier).<\/p>\n

This isn’t great news for the tech sector.<\/p>\n

But there’s another MA that could still serve as strong technical support – the 50-period MA (red line).<\/p>\n

You can think of the 50-period MA as the “last line of defense” in XLK. Right now, it’s at $126.58.<\/p>\n

Breaking below this technical indicator opens the door to further weakness. The next downside target would be the October 13 lows of $113.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Moving averages are great tools to help identify long, intermediate, and short-term trends.<\/p>\n

The 100- and 200-period averages identify the long-term trend in XLK as being to the downside.<\/p>\n

But the 50-period MA is excellent at identifying the intermediate trend.<\/p>\n

As you can see from the price chart, the market is currently trading above that 50-period average.<\/p>\n

So long as XLK can stay above it, the bulls don’t need to panic.<\/p>\n

But, if we break hard below this MA, then it’ll be a strong signal that the bears are in control.<\/p>\n

The bottom line is that this market is still at a crossroads.<\/p>\n

It’s easy for anyone to say that a market could<\/em> go higher or lower, but that kind of information isn’t useful.<\/p>\n

This why technical analysis is invaluable.<\/p>\n

Looking at the technicals of a market allows a trader to come up with clear parameters for what kind of action to take based on the market’s behavior.<\/p>\n

In the case of XLK, the parameters are straightforward:<\/p>\n

    \n
  1. \n

    The market is more likely to strengthen if it can eventually clear the 100- and 200-period resistance zone.<\/p>\n<\/li>\n

  2. \n

    The market is more likely to sell off if it breaks below the 50-period MA.<\/p>\n<\/li>\n<\/ol>\n

    \"Chart\"<\/div>\n

    Right now, we’re still in no-man’s land. And that’s the most dangerous area to be taking a trade.<\/p>\n

    I’ll be keeping a close eye on XLK to see which set of parameters the market is going to fulfill, and I’ll update you when that happens.<\/p>\n

    Happy trading.<\/p>\n

    Imre Gams
    Analyst, Market Minute <\/em><\/p>\n

    <\/p>\n

    Reader Mailbag<\/strong><\/h2>\n

    How has technical analysis helped you identity a good or bad trade setup?<\/p>\n

    Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    Moving averages are a useful technical indicator to help identify potential future support…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[76],"newsletter-type":[],"ticker":[],"class_list":["post-20432","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-imre-gams"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20432","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=20432"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20432\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=20432"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=20432"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=20432"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=20432"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=20432"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=20432"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=20432"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}