Originally Published March 23, 2022
Technology stocks have bounced off the recent low when the sector was down 20% from the peak in December. The short-term trend for the sector has turned negative as the markets continue to digest the new Fed guidance and the developments in Ukraine. A good proxy for the sector is the Technology Select Sector SPDR® ETF (XLK), which is now pushing against possible resistance near its 50-week moving average. The bulls have a lot of work to do if the sector is going resume the strong uptrend that began at the COVID lows in March of 2020. Our timeframe is months and years, and we still believe in the high margin growth story of this sector.
One year chart of XLK, 20 (yellow) & 50 (light blue) Week Simple Moving Averages Courtesy of Charles Schwab & Co. as of 03/23/2022
The technology sector performance has been constructive over the last week. Price for shares of XLK have broken the 50-week moving average and are trying to reclaim the 20-week moving average at about $161 per share. Bulls would like to see a strong breakout above these levels and push back above the $176 price to re-establish the uptrend.
One year chart of XLK, 20 (yellow) & 50 (light blue) Week Simple Moving Averages Courtesy of Charles Schwab & Co. as of 03/30/2022