Stocks continued their slide for a second day as post-election profit-taking pressures were alive and kicking on Wall Street. Gloomy headlines from Europe were at the forefront after it was reported that finance ministers might delay their decision on when to release aid for Greece. Better-than-expected economic data at home went largely unnoticed; weekly jobless claims came in at 355,000 versus the expected 365,000, showcasing the ongoing recovery in the domestic labor market [see Free 7 Simple & Cheap All-ETF Portfolios].
Since hitting its most recent peak at $48.01 a share on September 14, 2012, this ETF has managed to carve out a fairly well-defined, downward slopping channel (red lines) for itself. Notice how XLY failed to summit the $48 level on three occasions, first on September 14, then on September 19, and most recently on October 5, 2012. Following these failed attempts, this ETF has gone onto post a series of lower-highs and lower-lows, perhaps suggesting that the bulls are waiting on the sidelines for a steeper correction before jumping back in [see 101 ETF Lessons Every Financial Advisor Should Learn].
Seeing as XLY is trading near the bottom-half of its channel, jumping in long may appeal to speculative, short-term traders; however, given the series of lower-lows, were anticipating for this ETF to continue sliding closer to its 200-day moving average (yellow line), at which point buying pressures should ideally resurface [see also 3 ETF Trading Tips You Are Missing].Outlook
If the latest sentiment reading sends a wave of worry across Wall Street, expect for the consumer discretionary sector to trade lower; in terms of downside, XLY has support between $44-$45 a share. A surprisingly bullish sentiment reading may, however, inspire a broad-based rally; in terms of upside, this ETF has resistance at $47 a share followed by the $48 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Follow me on Twitter @SBojinov
Disclosure: No positions at time of writing.
- Wall Street