Technology Select Sector SPDR® ETF (XLK) Surges with Nearly Perfect Score – How Long Will it Last?
The Technology Select Sector SPDR® Fund ETF (XLK) has been on a remarkable surge lately, earning an impressive proprietary SID Buy Signal grade of 99 out of 100. This high score is a testament to the fantastic performance of technology stocks, fueled by the frenzy surrounding artificial intelligence (AI). However, investors are now left wondering how long this upward trajectory will continue.
Examining the weekly chart, we can see the strength of the Demand measured by Chaikin Money Flow. While it has been robust, there is a concerning change in direction as it begins to decline. This early signal suggests that Demand might be starting to drop, a development that warrants close monitoring in the weeks ahead.
The MACD Buy Signal, which indicates a long uptrend, shows no signs of weakness at this point. However, observant investors will notice that the bars in the bar chart are decreasing, providing another early warning that necessitates careful attention.
Analyzing the price movement, it is evident that there are no signs of weakness. The 40 and 10-week moving averages are trending upwards, and the price is following a bullish trend line formed by the 4-week moving average.
Another crucial indicator for portfolio managers seeking to outperform the Index is Relative Strength. XLK is currently experiencing a robust uptrend, indicating that it is outperforming the market. However, it is worth noting that the week-to-week line has recently flattened, indicating it is only performing as well as the market.
Just below Relative Strength is the Full Stochastic signal, which generates both Buy and Sell Signals. Currently, the signal remains in overbought territory for an extended period. The Sell Signal will be triggered when it breaks down, signifying a shift in market sentiment. However, there are no signs of that happening yet.
At the bottom of the chart, the color-coded ADX signal provides insights into the strength of Demand and Supply. The green line representing Demand remains strong, while Supply is decreasing rather than increasing. So far, there are no indications of weak Demand.
Additionally, we would like to present our proprietary list of 21 stocks in the Technology Sector that have also received our SID Buy Signal. XLK tops the list, as indicated by the red arrow, with an outstanding score of 99 out of 100. This comprehensive list provides investors with additional investment options that align with our Buy Signal criteria.
Among the listed stocks, Synopsys (SNPS) and Lam Research (LRCX) are already included in our 2024 Model Portfolio. We selectively purchase stocks during their weak phases using two timing signals: Tmg for portfolio managers and Cfrm for small investors and traders.
We have circled some stock names on the list that currently have timing signals indicating strategic buying opportunities for our Model Portfolio. These circled stocks include Palo Alto Networks (PANW), Fortinet (FTNT), Cadence Design (CDNS), Advanced Micro Devices (AMD), Monolithic Power (MPWR), Applied Materials (AMAT), and KLA Corp. (KLAC). Please note that KLAC has already reported its earnings and has moved up, no longer qualifying for our buy-on-weakness signal. Microsoft (MSFT) also had our timing signal, but the price was still declining as of July 27th.
Highlighted on the list are important earnings dates, significant percentage changes in price, and stocks reaching new highs. For instance, Lam Research (LRCX) witnessed a 9% increase and achieved new record highs.
In conclusion, the Technology Select Sector SPDR® Fund ETF (XLK) currently boasts an almost perfect Buy Signal according to our SID score. However, there are certain technical signals that are showing signs of weakening, warranting our close observation. Furthermore, investors have a wide range of 21 Technology stocks with our SID Buy Signal to consider. Of these, 7 stocks have timing signals indicating potential buying opportunities.
