Saturday, April 14, 2012

Technology Sector Update (QQQ, AAPL, SNDK & A)












The trend is your friend, until it bends. The tech sector has already bended, as shown by QQQ (The Nasdaq ETF), which is considered to be a good indicator of the technology sector. This was confirmed by non-other than the mammoth AAPL (Apple), which bended and broke its trend line on above average volume.


Should Apple sell off, panic should creep into the sector but I expect buying to come back in at some point. This should mark the beginning of a consolidation phase. Choppy price action is to be expected, a full blown reversal in price is unlikely.
The warning signs to AAPL and the tech sector came in a while ago, after SNDK (Sandisk) crashed down with a massive gap to trade below its 200 SMA and break below resistance, the news release that triggered this selling can be found here. This gap was followed by selling which sent the stock another $5 down. Again, this was just a warning sign, not an invitation to sell, the stock is bound to bounce sooner rather than later. If you caught the move when it broke below its 200 SMA and resistance, well done!


One of the stocks on my radar for this move is A (Agilent Technologies), I am waiting for a breakdown below support, the same level has been tested 4 times, a breakdown at this point seem to be imminent with a lot of room to go, the next support level is at 40.50, then at 39.00 where the 200 SMA resides.  


Again, this isn't an invitation to sell, selling short is a difficult game to master, short covering rallies take out even the best traders due to the short reversal nature of the move. Moves down don't go smoothly, their usually highly intense bumpy moves. That’s where position sizing comes into play, you have to size it appropriately as to not get shaken out.

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