XLK Price Momentum Divergence

9 Mar

Tech printed a triple divergence on a daily timeframe today between price and MACD, with a bearish engulfing candle close.

Even if today's high holds, we are likely to see a retrace higher of this downside move in the first half of next week.
Assuming the high holds, we are likely to see a pullback to the 50MA around ~ 200, or 3.5% lower than today close. A re-connect with the 200MA around 180 is not out of the question which would see price drop another 12-13%.

The recent examples of similar occurrences of price and momentum divergences are December (50MA test) and last July (200MA test).

9 May

Not

The last update on 3/8 marked the YTD high for XLK. The signs were certainly present for the possibility of a reversal with stalling momentum.

9 May

Not

The battle is now being fought between bulls and bears at the 50D SMA.
Additionally, price has broken out of a possible bear flag, but is still caught under the downtrend line from prior pivot highs, forming a constricting triangle.
The breakout trend direction from this current posture will probably determine the direction for the market for the next few weeks to months. Since a fake breakout is possible, the lowest risk way to try to initiate a new position would be to wait for a back test of the breakout to confirm the direction at the risk of being left behind, or alternatively trading based on the breakout, with a very tight stop in the event the move reverses.