Over the last month the technology sector has been one of the top performing groups. With stocks still in rally mode this year, there are a lot of technology companies that are leading this market higher. Four in particular have had a great month and year to date. Can the rally continue in these large capitalization technology stocks that are already up more than 15% this year?
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Apple Inc. (Nasdaq:AAPL) is having a very strong start to year, up 25.2% YTD and remains in a strong uptrend. A rise above the 52-week high at $526.29, seen only a few days ago, signals an advance into the $555 to $565 region. The aggressive rally provides little in the way of support other than the recent intra-day low at $486.63 and the $443 level which marks the top of a gap that occurred in late January. A drop back below $486.63 signals a potential further decline to the $450 region. Volume and on-balance volume have been declining overall since last year when the stock was around $400. As the stock trades near $500, volume has picked up again. Look for that to continue, as without the volume it will be hard to hold these levels. (For related reading, see How To Use Volume To Improve Your Trading.)
CA Inc. (NYSE:CA) is up 33.05% YTD and is also in a strong uptrend after breaking major resistance in the middle of January. Since the start of February, the stock has been channeling higher in a wedge formation. Support is $25.90 to $25.70 with primary support at $24.83. A move below the latter would begin to fill the gap seen earlier this year. A rise above $27.50 shows the stock still has strength and could target $28.50 - a level tested back in 2007. Beyond $28.50, there is resistance right up through $32. Therefore, the current strength should be respected but there is a lot of overhead resistance that will make the area a battle zone between bears and bulls. (For related reading, see Support And Resistance Reversals.)
Teradata Corp. (NYSE:TDC) has been moving in a big range from approximately $64 to $44 over the last nine months. After the stock found support early in the year, near the bottom of that range, it has exploded higher and currently trades near the range highs again. The stock is up 25.56% YTD. There are some concerns though. The stock recently put in a new 52-week high at $64.97, puncturing resistance formed by the last two price peaks. The stock was unable to hold those levels though, and for the last week-and-a-half it has continually closed below the former resistance level. Given the range the stock has been in, there is potential that range could continue and move back toward the $44 level. Support is at $61, and a drop below that signals a reversal. On the other hand, a rise above $65 gives a clear breakout signal, removes all resistance and leaves a lot of room to run to the upside. (For related reading, see The Psychology Of Support And Resistance Zones.)
Cerner Corp. (Nasdaq:CERN) is up 14.8% so far this year and is within striking distance of the 2011 high at $74.39. Short-term resistance has developed at $72.25, with a rise above that mark likely to trigger a test of the high. A move above the 2011 high leaves no resistance in sight and opens up the potential for another strong leg higher. $67.75 is the nearest support, with a drop below that price likely to trigger selling into support at $64. Other than big volume on the gap higher in early February, volume has been declining since last August. Look for volume to increase at new highs, as without renewed interest it will hard for the stock to continue to climb.
The Bottom Line
Stocks are still in rally mode and these four have been helping to lead the market higher. All in strong trends at the moment, each has a resistance level to clear before the next advance can begin. The steep ascent of these stops means support levels should be watched closely as steep pullbacks could occur. Yet, as long as support holds and the trend is higher, look for movements toward the next price targets, assuming resistance can be broken. (For related reading, see Interpreting Support And Resistance Zones.)
At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.
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