The heightened volatility in global equities over the past several trading sessions has asset prices in nearly every sector market heading toward long-term support levels. Most active traders have been on the lookout for buying opportunities, and one of the sectors that has been consistently popping up on radars is technology. In the paragraphs below, we'll take a look at some of the biggest names in tech as well as a popular tech-specific exchange-traded fund (ETF) and try to determine how traders will be looking to position themselves over the weeks or months ahead.
Technology Select Sector SPDR Fund (XLK)
Investors who are interested in long-term trends of specific sectors often turn to ETFs such as the Technology Select Sector SPDR Fund (XLK). Fundamentally, this ETF comprises 71 stocks from across the U.S. tech sector and carries a reasonable gross expense ratio of 0.13%.
As you can see from the chart below, the recent break below the 50-day moving average, which has propped up the price in the past, suggests that the selling pressure is stronger than many were anticipating. Based on the chart pattern, active traders will likely watch to see whether the next level to act as a floor to falling prices is the ascending trendline near $87 or the 200-day moving average near $84.
Alphabet Inc. (GOOG)
When it comes to technology, one of the companies that instantly comes into the minds of many traders is Alphabet Inc. (GOOG). As you can see from the chart below, the price has recently fallen below the support of a short-term trendline and is quickly approaching the support of a medium-term trendline, which is trading at $1,350.
Traders will likely keep a close eye on price action over the next few sessions because a bounce off of the nearby trendline could send prices back toward the swing high near $1,550. Should the price fall below the $1,350 level, then most followers of technical analysis will likely look to buy near the support of the 200-day moving average, which is trading at $1,255.01.
Amazon.com, Inc. (AMZN)
Another top tech company that was experiencing a sharp rally higher in 2020 until recent selling pressure took over is Amazon.com, Inc. (AMZN). Taking a look at the chart, you can see that the price has been closing the gap from the late-January surge and is about to test the support of the 50-day moving average.
Active traders will most likely want to take note of the recent bullish crossover between the long-term 50-day and 200-day moving averages because it is a popular buy signal used to mark the beginning of a major long-term uptrend. In the case of Amazon, which is already trading within one of the strongest long-term uptrends, this could be presenting a buying opportunity for those willing to take on risk.
The Bottom Line
The global market sell-off is based on rational fears of a global health pandemic and the associated impact on underlying businesses. Until more details become known, the recent sell-off in U.S. tech companies could be presenting traders with a lucrative buying opportunity with a limited amount of downside risk given the proximity to major support levels.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.