Sunday, November 08, 2015

Another canary singing? Technology (XLK)

This struck me as an excellent speculative short/sell that was simply too good to pass up. Everything about this chart is screaming 'top' and almost all indicators of note are overbought (RSI, stochastics, PMO, momentum).

The transitional pattern we have been seeing with technology started approximately in August when the strong ascending channel was replaced with a more horizontal channel. Now a bearish ascending wedge has appeared after an almost uninterrupted climb from late September.
Some longer term indicators have already crossed over however momentum is very strongly positive meaning this might be an intermediate decline before a second top is put in. Some commentators (Northman Trader springs to mind) have said that an ascent in the broad market until the end of the year is possible which gives a second lower high plenty of time to go in on this chart. We have a gap to fill from $43.50 to about $42.50 with Fibonacci retracement levels at $42.08, $41.36 and $40.85. Coincidentally the MA(144) is at $41.38 at the moment which adds additional credence to the Fibonacci levels and the MFI indicator peaked two weeks ago