Why the Tech Sector Is Still at a Crossroads

Moving averages are a useful technical indicator to help identify potential future support. [Jeff Clark's Market Minute]( Why the Tech Sector Is Still at a Crossroads By Imre Gams, analyst, Market Minute On [November 21]( I warned that the technical setup in the SPDR Technology ETF (XLK) could result in the exchange-traded fund (ETF) breaking lower. Finally on December 1, XLK put in a top. Since then, the ETF has sold off by as much as 6%. 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. 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[>> Simply click here to get all the details. <<]( -- First, let’s take a look at the price chart I showed at the time… [(Click here to expand image)]( The market was just entering the resistance zone between the two moving averages (blue and green lines). XLK couldn’t break through this zone and sold off instead. Now, the next step is to identify where the market might find support. 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. So, let’s look at a current price chart of XLK so I can show you what I mean… [(Click here to expand image)]( The price action has visibly struggled to break past the 100- and 200-period MA (the resistance zone I mentioned earlier). This isn’t great news for the tech sector. But there’s another MA that could still serve as strong technical support – the 50-period MA (red line). You can think of the 50-period MA as the “last line of defense” in XLK. Right now, it’s at $126.58. Breaking below this technical indicator opens the door to further weakness. The next downside target would be the October 13 lows of $113. Free Trading Resources 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 – at zero cost to you. Just [click here]( to check it out. Moving averages are great tools to help identify long, intermediate, and short-term trends. The 100- and 200-period averages identify the long-term trend in XLK as being to the downside. But the 50-period MA is excellent at identifying the intermediate trend. As you can see from the price chart, the market is currently trading above that 50-period average. So long as XLK can stay above it, the bulls don’t need to panic. But, if we break hard below this MA, then it’ll be a strong signal that the bears are in control. The bottom line is that this market is still at a crossroads. It’s easy for anyone to say that a market could go higher or lower, but that kind of information isn’t useful. This why technical analysis is invaluable. 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. In the case of XLK, the parameters are straightforward: - The market is more likely to strengthen if it can eventually clear the 100- and 200-period resistance zone. - The market is more likely to sell off if it breaks below the 50-period MA. [Financial genius reveals unusual investment strategy that works in ANY market]( [(Click here to expand image)]( Right now, we’re still in no-man’s land. And that’s the most dangerous area to be taking a trade. 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. Happy trading. Imre Gams Analyst, Market Minute Reader Mailbag How has technical analysis helped you identity a good or bad trade setup? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. In Case You Missed It… [Market Wizard forecasts 5 years of famine]( Hi. Larry Benedict here with a new forecast. I believe we’re headed for a serious rough patch… I believe all the indexes will be flat or negative for a long time. We’ve had 10 years of plenty. Now we’re looking at five years of famine. I predicted the Fed would issue a series of rate hikes…. And that is what is going to cause this prolonged bear market. I think we’re about to see a repeat of the late ’70s and early ’80s. Inflation was rampant then, so the Fed issued a series of rate hikes to tamp it down. Naturally, that combination created wild volatility. It was very similar to what we’re seeing right now. I’ve lived through times like these… And my One Ticker Trader is perfect for what’s coming. I believe you could have several opportunities to see huge gains in very little time. To learn all about it… [Watch my latest video right here.]( [image]( Get Instant Access Click to read these free reports and automatically sign up for daily research. [The 101 Guide to Pre-IPO Investing]( [An Insider's Guide to Making a Fortune from Small Tech Stocks]( [The Ultimate Guide to Taking Back Your Privacy]( [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. 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