Tech Sector Flashes 52-Week High

On Friday, we looked at a Keltner Channel chart of iShares U.S. Home Construction ETF, which has been on a pullback from being overbought.

Today’s Chart of the Day is a Daily Price chart for Technology Select Sector SPDR (NYSE: XLK).

But before we get into what the chart signifies for XLK…

I’d like to take a moment and say thank you for all of the feedback we’ve been getting!

And today, I’m going to address a concern sent in from one Chart of the Day reader.

Steve S. says:

You just sent a Chart of the Day for RH. If I use the 1% rule, I would be looking at a January 2020 $125 call that currently has an asking price of $51. So one call would cost $5,100, which is more than my account value (or the amount you started with years ago).

I can totally understand where Steve S. is coming from.

Yes, RH is a very high priced stock trading at $175. Smaller accounts would not be able to purchase an in-the-money option for RH.

But not all options are priced this high. In fact, readers of my PowerTrend Options service had the chance to enter four options trades with an average cost of $1,002 per option contract. So a smaller $5,000 account would be able to trade about 5 options in different sectors. That’s a good start, whether you’re a beginning or experienced trader.

If you want to learn more about PowerTrend Options, where I recommend two options trades each week, click here.

Either way, it’s good to know that the readers of this e-letter are taking risk management into consideration, and being careful about which trades they choose to enter.

Now, let’s get back to XLK…

XLK Makes series chart

XLK seeks investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in the Technology Select Sector Index.

Now, the chart below shows that XLK has been making a series of 52-Week Highs for the last year.

Remember…

Stocks just don’t hit 52-Week Highs for a whole year unless they’re in a very powerful uptrend.

We know that stocks in a price uptrend do not advance in a straight line…

And that there are always price retracements along the way…

Looking at the chart, we can see that XLK has experienced periodic price pullbacks since last November.

Traders can get a lower risk entry point after a 3 to 5% price retracement, as the stock normally resumes its price up trend after such retracements.

We’ll be sure to keep checking XLK stock as it climbs to new heights, and noting any price retracements.

In fact, in the PowerTrend Options service, we recommended a buy on XLK several weeks ago. If you had gotten into the right option contract two weeks, you’d be up 34.3% already!

That’s the power of options.

Best Regards,

Chuck Hughes
Editor, Chart Of The Day

Chuck Hughes

Written By Chuck Hughes

Before Chuck Hughes won 10 Trading Championships, he was an accomplished Air Force pilot. In fact, he credits his success as a stock and options trader to his disciplined upbringing and career. When he was deciding between a career in the Navy and a career in the Air Force, the Navy told him he’d only have a 33% chance of flying jets. The Air Force gave him 100%. He liked those odds better. 35 years ago, Chuck had a wife, a young daughter, a son on the way, and a huge mortgage to afford. He didn’t want to give up on his lifelong dream and stop flying for a major commercial airline. He knew he needed to supplement his income during the 15 days a month he wasn’t flying. So he used his experience in discipline and math, and his understanding of finance and the stock markets (which he’d always been interested in,) and opened a $4,600 trading account. He made over $460,000 in profits his first two years of trading, and he hasn’t looked back since. When he was diagnosed with Meniere’s disease 15 years later, which commonly leads to vertigo…He knew his career as a pilot wouldn’t last much longer with those odds. But he didn’t have to scurry to find another gig, or panic about how his family would eat… He’d spent the last 15 years perfecting his system and raking in cash. As an options trader, Chuck does not let his emotions get in the way of his trading strategy. He adheres to disciplined and methodical options and stock trades. Because he respects the options game so highly, and understands the true freedom that financial solvency can bring, Chuck was able to design and refine his system and win those 10 Trading Championships. Put simply, Chuck Hughes’ trading strategies work, and in all types of market conditions. They’ve worked throughout the bull, bear, and flat markets America has seen in the last 30 years. Chuck Hughes has spent that time building a reputation as one of the most trustworthy options traders in the industry. His publishing group Legacy Publishing LLC was one of the few trading groups on the planet to have correctly predicted and profited from the 2008 financial crash .As a published author 16 times over, a 10-time Trading Championship winner, and an options-trading teacher for 25 years, he’s learned to trade and teach without an ego.