Engulfing Candles Menace Big Tech
Price action in the market has grown more cautious, especially toward technology stocks.
The first big pattern occurred on Monday, when the SPDR Technology ETF jumped to a new all-time high above $175. But it was negative within an hour and closed the session under Friday’s low – a big bearish engulfing candle.
Similar patterns appeared on November 22 and December 1.
Next, gains have narrowed in Big Tech as Apple accounts for more of the upside. (Consider the second chart comparing XLK to AAPL.) Meanwhile former workhorses of the sector like ServiceNow and Adobe have teetered.
Finally, MACD made a lower high this month as XLK made a higher high – bearish divergence.
The weakness resembles patterns earlier in the year as bond yields jumped. This time, it occurs shortly before the Fed is expected to accelerate tapering. Is it the start of a new trend as Jerome Powell looks to unwind historic stimulus?
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This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
The first big pattern occurred on Monday, when the SPDR Technology ETF jumped to a new all-time high above $175. But it was negative within an hour and closed the session under Friday’s low – a big bearish engulfing candle.
Similar patterns appeared on November 22 and December 1.
Next, gains have narrowed in Big Tech as Apple accounts for more of the upside. (Consider the second chart comparing XLK to AAPL.) Meanwhile former workhorses of the sector like ServiceNow and Adobe have teetered.
Finally, MACD made a lower high this month as XLK made a higher high – bearish divergence.
The weakness resembles patterns earlier in the year as bond yields jumped. This time, it occurs shortly before the Fed is expected to accelerate tapering. Is it the start of a new trend as Jerome Powell looks to unwind historic stimulus?
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradingView is not affiliated with TradeStation Securities Inc. or its affiliates. TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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