The technology sector has been one of the strongest performing segments of the market for much of the past decade. As you may know, the consolidation of influence among some of the biggest names has led to one of the longest upward trends ever recorded. In this article, we take a look at some key charts from across the technology sector and attempt to pick a couple that are trading near influential levels of support and that could be good candidates for a move higher over the coming months.
Technology Select Sector SPDR Fund (XLK)
The rise of niche exchange-traded products such as the Technology Select Sector SPDR Fund (XLK) is one of the best ways for traders to gain exposure to broad trends such as the one in technology. Taking a look at the chart, you'll find that the retracement from the April high near $80 has sent the price toward a key level of support shown by the dotted trendline. Traders will keep a close eye on this trendline because it has influenced the price in the past, and based on technical analysis, this type of behavior is expected to continue into the future.
It's also worth noting that the 200-day moving average is close by, which also is commonly used as a level of long-term resistance and is often looked to as a gauge for the primary trend. From a risk management perspective, traders will most likely look to protect positions by placing stop-loss orders below $70.48 in case of a sudden shift in market sentiment.
Intel Corporation (INTC)
When it comes to technological devices, one of the largest players that provides the chips that make them work is Intel Corporation (INTC). Taking a look at the chart, you can see that the price has fallen sharply over the past several weeks and is now trading near an interesting level of support shown by the dotted trendline.
Active traders may be interested in adding a position here because the relative strength index (RSI) indicator currently has a reading below 30, which suggests that the sell-off is overdone and that the stock could be prime for a significant bounce higher. Short-term target prices will likely be set near $48.45, which is equal to the 200-day moving average. A close above that level would likely then lead to target prices near the top of the gap around $57.50 and eventually higher.
Adobe Inc. (ADBE)
The tools used by the creative industries are primary sold by Adobe Inc. (ADBE). The strong leadership in software and related products makes the company a prime target for long-term investors and active traders alike. Taking a look at the chart, you can see that the 50-day moving average has recently crossed above the 200-day moving average, known as the golden crossover. The common buy signal is usually used by followers of technical analysis to mark the beginning of long-term uptrends.
Traders will likely look to add a position close to current levels because of the bullish crossover but also because of the short-term support provided by the horizontal trendline. This level has proven to be influential over the past few months and provides a clear level for traders looking to place their orders. Target prices will likely be set near the psychological $300 mark.
The Bottom Line
Technology has been one of the best performing market segments, and most companies are currently trading within extremely well-defined uptrends. Those who follow technical analysis may be able to find opportunities such as those shown on the charts of Intel and Adobe.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.