MARKING FUTURE SUPPORT FOR THE XLY, XLK, XLI AND XLF -- SEMICONDUCTOR SPDR CONFIRMS CONTINUATION PATTERN -- FOUR SEMICONDUCTOR STOCKS GOING FOR BREAKOUTS -- THE INTERNET OF EVERYTHING ETF FORMS BULLISH PENNANT -- EBAY HITS AN INTERESTING JUNCTURE
MARKING FUTURE SUPPORT FOR THE XLY, XLK, XLI AND XLF... Link for today's video. There is no doubt that the four offensive sector SPDRs are in up trends. First, all four are trading within a few percent of their 52-week highs. Second, current prices are near the upper right hand corner of the chart. In essence, prices moved from the lower left to the upper right over the last 2-3 years. Admittedly, these SPDRs have become a little overextended and ripe for a correction, which could involve a pullback or a consolidation (sideways range). We should, however, admit that it is quite hard to quantify overbought and oversold. Sure, we can use RSI, the Commodity Channel Index (CCI) and the Stochastic Oscillator to quantify overbought and oversold, but the reality is that stocks and ETFs often become overbought and remain overbought in strong uptrends. So even though the world knows stocks are overbought and ripe for a correction, nobody really knows when or how it will occur. At this point, I am just treading water and marking support levels to watch should a correction unfold. One such technique involves adding bars to a SharpChart and extending trend lines to guesstimate future support levels. Chart 1 shows the Consumer Discretionary SPDR (XLY) within a rising price channel since November 2011. XLY touched the upper trend line in May and July 2013, but these touches did not slow the advance very much. At this point, the long-term trend remains up and strong as XLY rises within the upper half of this channel. I would mark long-term support in the low 60s. The lower trend line extends to this area in March and broken resistance turns support here.
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Chart 1
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Chart 2
Chart 2 shows the Technology SPDR (XLK) within a thirteen month rising channel. The ETF hit the upper trend line in late December and stalled the last three to four weeks. The lower trend line marks support in the 34 area in March. There is also support from the December low in this area. The indicator window shows the price relative (XLK:SPY ratio) breaking out in late November. This means XLK is starting to outperform the broader market. Chart 3 shows the Industrials SPDR (XLI) hitting the upper trend line of a thirteen month channel. Chart 4 shows the Finance SPDR (XLF) with a triangle breakout in October and future support marked in the 20.5-21 area.
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Chart 3
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Chart 4
SEMICONDUCTOR SPDR CONFIRMS CONTINUATION PATTERN... Semis are leading the market and the tech sector today as the Semiconductor SPDR (XSD) surged above flag resistance and hit a new high. Chart 5 shows weekly candlesticks over the last three years for some perspective. Notice how XSD broke out in December 2012 to reverse the 2012 downtrend and moved steadily higher in 2013. This advance narrowed in the second half as a tight rising channel took shape. XSD broke to new highs in December and this breakout is holding. There is no sign of a downtrend here. The indicator window shows the price relative (XSD:$SPX ratio) in a slight uptrend since October 2012. Chart 6 shows daily candlesticks and a flag breakout today. With this move, the ETF hit a new high and chartists can mark support in the 59.5-60 zone.
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Chart 5
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Chart 6
FOUR SEMICONDUCTOR STOCKS GOING FOR BREAKOUTS ... The next four charts show some individual names within the semiconductor group. Even though Intel (INTC) is the headline mover today with a 3+ percent surge and a new high, there are others within this cyclical group that warrant a second look. Don't forget that earnings season just started and all four will report within the next few weeks. Chart 7 shows Integrated Device Technology (IDTI) breaking triangle resistance with a surge the last five days. The stock still has resistance from the December highs, but this initial breakout looks strong and chartists can mark support in the 9.5-9.75 area.
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Chart 7
Chart 8 shows Lattice Semiconductor (LSCC) with a massive surge from late October to mid November. The stock then consolidated for several weeks and broke out with a three day surge above 5.70. This signals a continuation of the prior advance and chartists can mark support at 5.30.
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Chart 8
Chart 9 shows TriQuint Semiconductor (TQNT) filling the October gap and breaking above its December highs with a surge today. Also notice that the stock broke falling wedge resistance.
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Chart 9
Chart 10 shows Xilinx (XLNX) breaking out in mid December with a surge above 46. The stock subsequently corrected with a falling wedge in January. With today's surge, XLNX is challenging wedge resistance and attempting another breakout.
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Chart 10
THE INTERNET OF EVERYTHING ETF FORMS BULLISH PENNANT... As it's name implies, the Internet ETF (FDN) from FirstTrust represents the Who's Who of the internet. Google (GOOG) gets top billing with a 10% weighting. Amazon (AMZN) weighs in at 7.48%, followed by Facebook (FB) at 6.73% and eBay (EBAY) at 5.37%. The first three stocks are largely responsible for its stellar performance over the last six months. Notice how the SCTR has been above 90 since August, which means it is in the 90th percentile for relative strength among ETFs. Even though we can debate overbought conditions and the timing of a correction, there is no debate on the trend and relative performance. Chart 11 shows FDN advancing over 10% in November-December and then forming a pennant, which is a bullish continuation pattern. A break above the upper trend line would end this little consolidation and signal a continuation higher. Chartists can watch the lower trend line for a support break that would signal the start of a deeper pullback.
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Chart 11
EBAY HITS AN INTERESTING CHART JUNCTURE... Chart 11 shows eBay at an interesting juncture on the price chart. First, notice that the stock quickly recovered after the November support break and forged a bear trap. Second, the stock followed through with a surge and break above the November high. After becoming "overbought", EBAY pulled back in January and retraced 50-62% of the prior advance. Also notice that this move returned to the breakout, which makes it a "throwback". A break above 53 would provide the first signal that the pullback is ending and the advance is resuming. Careful here because EBAY reports earnings next week.
