A Weekly Look At The Technology Sector ETF (XLK)

Let’s take a look at the XLK Technology Sector ETF (XLK), as it’s caught between two key boundaries and is showing an interesting pattern.  Let’s see it:

We see the XLK above from the 2007 peak of $28 per share to the splitting in half of its value to the 2008 lows just under $13 per share.

Look carefully to note that the XLK - and NASDAQ Index - actually bottomed in November, ahead of the March 2009 lows in the stock market, which showed relative strength and was a slight leading indicator of strength.

We see the powerful rally off the lows that has taken us back to the $21 per share level, but there’s some key overhead resistance to watch here.

Namely, we have the 200 week simple moving average at $21.30 per share - price failed to overcome this level on the recent swing high.

Also, the upper Bollinger Band rests at $21.49.  We also see prior price support (which - due to the polarity principle - can become resistance) also at the $21.00 per share level.

There’s also a slight flat-line (slightly negative) momentum divergence at the recent highs as well.

Taken together, this paints a picture of bullish caution, with a “wait and see” attitude to assess whether price can push beyond resistance at the $21 level - if so, it would be a stellar accomplishment that would argue for even further prices (having cleared away resistance).

If not, then expect a swing down to the $19 level to test the 20 and 50 week EMAs for possible support.  A failure to hold that level opens up an expectation for a downswing to try the $17 level.

In summary - keep focused on the $21 level as the “line in the sand” for clues as to what to expect both in the XLK… and to an extent, in the broader market.

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