When Will Internet Stocks Lose Their Connection?
Much of the bull market was led higher by technology, particularly the Dow Jones U.S. Internet Index. So after the 2016 head & shoulders and long-term price breakdown, where might the current rally stall? The 1015-1025 range has proven in the past to be quite significant. Therefore, as prices move higher and into that range, we need to be careful. The last attempt at a rally failed at 1025 and the declining 20 day EMA currently resides at 1020. Visually, the red circle below highlights this range of potential resistance.
On a relative strength basis, internet stocks have performed quite well vs. the S&P 500 in 2016, but that's a minor positive as the overall market has been free-falling. If the recent downtrend resumes, there's a good chance that this riskier internet space could become a target of the selling. Relative support could be found near .500 level.
Happy trading!
Tom
