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Key Levels Set In For This Sector ETF ⎯ Are You Watching?

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– ETF Watchlist –

Historically, healthy bull rallies aren’t just driven by one sector of the market. Typically, they have wide participation of most of the other sectors in the market as well. This isn’t to suggest this is a false rally and traders should start opening short positions just based on that fact. However, it should give one pause before going all in on the rally to continue. We must still be patient and disciplined in our approach.

This doesn’t mean that there aren’t still opportunities out there for those who are diligent. It just implies that this move is supported by less sectors than we would like. The rally we are seeing has been the result of investors flooding back into the tech sector en masse, mostly due to the hype around the recent advancements in the AI industry.

Big name players like Microsoft (MSFT), Google (GOOGL), and Nvidia (NVDA) have been at the top of the watchlist for many investors as this technology becomes more operational. Yet, you still have many calling this rally a “bubble,” signaling many people’s belief that the pop could come at any moment.

However, the trade we wanted to highlight today is not tech related, but rather tied to the stubborn strength of the communication services side of the tech sector, despite rising concern of a AI induced bubble.

Communication Services Select Sector SPDR Fund (XLC)

This sector ETF, with top holdings like Meta (META), Google (GOOGL), Comcast (CMCSA), and Netflix (NFLX), there is more of an emphasis on on advertising revenue and software as a service rather than just AI hype contributing to the surge in these names.

Moreover, these names have somewhat lagged for this reason. Apart from META, which has seen its own meteoric rise, GOOGL has yet to participate in the rally in a major way and any rally seen in the other two names may not be caused by the AI boom.

To top it off, a good opportunity to play this ETF to the upside may have just presented itself. The ETF fell down to a previous level of support before bouncing up again. These are the types of entry points we want to find for trades we plan to let play our over the course of several days.

The 62 level on the XLC stepped in with buyers forcing the price upward. If this rally has the legs many believe it does, this could be the blowing off of some of that steam traders watching this ETF could have been waiting for.

Resistance was put in during the pre-market hours of Tuesdays session around 63. Another good entry strategy would be if this level was to be broken with strength, to watch out for a retest of this resistance level to find out if has then become an important support level. Keep these level on watch to find where you opportunities lie, but remember to trade smart and trade safe… always.

Join my Smart Trades options trading service today to see exactly how my students and I trade these types of scenarios! Smart Trades is where I teach my students how I trade options on some of the largest ETFs on the exchange. As you learn, you’ll get exclusive access to all my trades with notifications any time one is put on. Now, you can learn how many use this high-income skill to achieve financial freedom. Join today and as always…

Good Luck With Your Trading!

Christian Tharp, CMT

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Christian Tharp

I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group. My Chartered Market Technician (CMT) designation substantiates me as an expert in areas such as the technical analysis of stock trends, market indicators, cycles, price patterns, Elliot Wave principles, Candlestick charting, analyzing financial trends and behaviors, portfolio strategies, and forecasting future price movements. With my straightforward approach to simple, systematic trading, students learn how to strategically assess buy signals and market entry timing, establishment and management of stop losses, and how to employ a simple and disciplined trading approach that creates profits.

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