:max_bytes(150000):strip_icc()/XLKChart-d05878ba54d542dbae4fa3161eb5ebcc.gif "Watch these XLK Tech Sector ETF price levels given recent volatility")
Key findings
- The Technology Select Sector SPDR Fund, which significantly increased its position in Nvidia and reduced its position in Apple in June, lost 6 percent this month due to concerns about the health of the U.S. economy.
- XLK fell below the 200-day moving average during last Monday’s global sell-off, but recovered and reclaimed the indicator by Thursday’s close.
- The ETF price could face support around $200 and $194, while it faces resistance at $210 and $218.
The Technology Select Sector SPDR Fund (XLK) is down 6% this month amid a downturn in technology stocks.
The fund had a volatile start to August amid concerns about the U.S. economy after several reports pointed to a slowdown in economic activity. XLK’s recent rebalancing in June, which saw it increase its holding in artificial intelligence (AI) darling Nvidia (NVDA) to 19% from around 6% and reduce its allocation to iPhone maker Apple (AAPL) to 5% from around 22%, also weighed on performance.
The rebalancing means the fund did not fully benefit from Nvidia’s impressive gains in the first half of the year, but did realize a larger portion of the sharp correction of recent months. Since the rebalancing on June 21, Nvidia has fallen 17 percent, while Apple has gained 4 percent.
Below, we will take a closer look at the technical data on XLK’s chart and identify key price levels that investors are likely to keep an eye on.
Fund reaches 200-day moving average again
Since peaking in early July, the ETF’s price has fallen as much as 20 percent from its record high as investors took profits on mega-cap technology stocks. Most recently, the fund fell below the closely watched 200-day moving average (MA) during last Monday’s global stock market collapse, but recovered to reach the indicator again by Thursday’s close.
Given the potential for further volatility in the technology sector, investors should keep an eye on these key support and resistance levels on the XLK chart.
Support levels to watch
The first key support area to watch is around $200, currently just below the 200-day moving average, where the price should find buying interest near the psychological round number and a minor top formed at the start of the fund’s trending move between April and July.
Failure to hold that level could see the ETF return to the lower support line at $194, an area on the chart where investors could look for entry points near a horizontal line connecting the December 2023 swing high to comparable lows in April and August. This area is also in close proximity to an uptrend line that stretches back to the October 2022 low.
Resistance levels to monitor
First, the fund’s price could face overhead resistance at $210, where sellers could try to take profits in the area of a trend line that connects a consolidation phase in March with a minor decline in June and the pre-gap trading level of August 1.
Further upside could lead to a move to $218. This area could face resistance around the May peak and the daily high of several trading sessions in late July and early August, with the region also just below the downtrending 50-day MA.
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At the time of writing, the author does not own any of the securities mentioned above.
