Engulfing Candles Menace Big TechPrice 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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