Thursday’s ETF Chart To Watch: Technology Select Sector SPDR (XLK)

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Optimism and upbeat earnings carried markets higher for yet another session. The S&P 500 Index continues to inch closer and closer to the psychologically important 1,500 mark, with benchmark settling right at 1,496 as the closing bell rang on Wednesday. On the economic front, FHFA home price data came in line with expectations, posting a 0.6% increase. To the north, Canada’s central bank kept interest rates steady at 1.00% as expected, with the loonie sinking lower in the currency market on the day [see Visual History Of The S&P 500].

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New York Stock Exchange

The spotlight remains fixated on corporate earnings at home, and with several tech giants set to report later today, we will be closely watching the State Street Technology Select Sector SPDR (XLK, A+). This ETF may experience volatile trading as investors react to overnight results from Apple (AAPL), while also looking ahead to quarterly numbers from Microsoft (MSFT) and AT&T (T) both of which are due after the closing bell [see High Tech ETFdb Portfolio].

Chart Analysis

XLK was able to rebound off its 200-day moving average (yellow line) yesterday and even gap higher as better-than-expected performance results from Google (GOOG) and IBM (IBM) offered a much-needed fundamental catalyst. The recent string of upbeat earnings is certainly encouraging for this ETF, and from a technical perspective, the fact that it has managed to bounce off its 200-day moving average is also encouraging. Furthermore, this ETF has climbed higher along a rising support level (blue line) since bottoming out on November 16, 2012, adding further weight to the bullish thesis [see 101 High Yielding ETFs For Every Dividend Investor].

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XLK

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Investors looking to jump in long at current levels should consider placing a tight stop-loss above $29 a share, seeing as XLK will likely accelerate downwards if it breaks below this support level [see How To Swing Trade ETFs].

Outlook

Apple’s earnings certainly may create headwinds for XLK on the day; in terms of downside, immediate support comes in around $29 a share followed by the $28 level. On the other hand, continuing euphoria in the tech sector may inspire further gains; in terms of upside, immediate resistance lies at $30 a share followed by the $31 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.

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