Tickers in this Article: XLK, S, HRS, STX, WDC
Technology stocks have been one of the top performing sectors over the last month, up 6.7% as represented by the SPDR Technology Select Index (ARCA:XLK) ETF. As the sector moves higher, but still remains below the 52-week high seen in April, a handful of technology stocks have powered to new highs. The rise in these stocks provides bulls and bears with potential opportunities. The steep ascent means more profits are still possible on the long side. For the bears, there is potential for a significant reversal if the prices break below support.

SEE: Retracement Or Reversal: Know The Difference

Sprint Nextel (NYSE:S) has been on a real tear since the start of June, tacking on a 99.6% gain in the last three months. As a top performer, the trend higher is steep and warrants attention. With the uptrend still intact, those who are bullish may still have more profits to squeeze out of the stock; a new 52-week high was created on August 14. Those who are bearish, or bulls looking to protect profits, can watch support at $4.20 and $4.00. If either of these levels is broken - but especially the latter - it indicates a price peak could be in for the stock. Where the eventual price high will be is not clear, given the steep angle of the trend. If support holds on pullbacks there is a buying opportunity as the uptrend stays intact and could challenge and surpass the 52-week high. Volume over the last several sessions has been lower than on the former rally at the end of the July, warning that a correction could occur shortly and a peak may be forming now.

Harris Corp. (NYSE:HRS) through late July and August has surged higher, putting in a 52-week high at $45.92 on August 9. The $46 area has been resistance on two prior occasions - at the beginning and end of April. If the stock can break above $46, another wave higher could ensue. $50 is an important psychological mark, but targets extend up to $53.25. If the stock can't break through the resistance barrier, or breaks above and then quickly retreats back below, a decline is likely to ensue. A drop below $44.72 is an additional sign of potential trouble. If that level is broken there is with support until $43 and $41.

SEE:Support & Resistance Basics

Seagate Technology (Nasdaq:STX) has tacked on more than a 50% gain since June from a low of $21.74 on June 1, to the 52-week high of $34.66 on August 13. With the long-term trend higher, pullbacks present buying opportunities. The trendline current intersects at $26, which means the stock can correct about 20% and still be in an uptrend. Additional support is at $22.50 and $21.60. The latter would need to be broken in order to confirm the uptrend is over. Starting from late July a short-term trendline can be drawn. This line provides additional trade signals. A drop below $32 indicates a decline could develop, pushing the stock toward the longer-term trendline, although with trend higher on multiple time frames going against the trend could present a challenge.

Western Digital (Nasdaq:WDC) is also in uptrend, but long-term has not significantly cleared resistance in order to confirm another wave higher. On April 26, the stock peaked at $44.44. On August 14, the stock made a new 52-week high at $44.75. This is a pivotal price region for the stock. A push above $45, especially if volume rises with it, opens up the potential for further upside. The next target is $46.50, but could go higher if the long-term uptrend continues to unfold. Right now, the uptrend continuing is questionable though - this could be a double top. A drop below $42 is the first sign of trouble, but a drop below $38 could send the stock tumbling to the $34 to $32 support region.

SEE: Technical Analysis: Support And Resistance

The Bottom Line
Technology stocks are moving higher, and a handful are helping to lead the charge. With the trend higher, upside potential is still possible. Fighting a trend can be a losing battle, but with some of these stocks at critical levels, corrections and reversals may occur. Always watch support levels as the pullbacks can provide buying opportunities for bulls, and if penetrated can flash sell and short trade signals to the bears.

Charts courtesy of stockcharts.com

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

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