By Peet Serfontein & Zimele Mbanjwa
The Technology Select Sector SPDR ETF tracks the performance of The Technology Select Sector Index. The ETF holds companies primarily involved in such industries as software and services, IT consulting services, semiconductor equipment, computer and peripherals.
The ETF itself consists of 69 different holdings, which in aggregate comprise of 31.7% of the S&P 500 market capitalisation. The top-five holdings at end September 2024 were Apple (~15%), Microsoft (~13.6%), Nvidia (~12.7%), Broadcom (~4.5%) and Oracle (~3%).
The ETF is popular among investors seeking to capitalise on the growth potential of the technology sector, which has consistently outperformed many other sectors over recent years. With its focus on large-cap technology firms, XLK benefits from strong balance sheets, robust innovation, and global demand for tech products and services.
Technically, the ETF price is in Wave 5 of the Elliott Wave cycle on the daily time interval (see the insert on the main chart). This supports a bullish case as Wave 5 is typically associated with a final upward thrust in a broader bullish trend. This wave generally represents the final leg of the prevailing bullish trend and is often driven by positive market sentiment. The price moves higher as the bullish forces from earlier waves (especially the strong Wave 3) continue to push prices up. Investors typically view Wave 5 as a continuation of the uptrend, suggesting that there is still room for additional gains before a corrective phase begins.
The ETF is trading above its 200-day simple moving average of ~$212.11. Price action in the markup phase out of the Wyckoff Price Cycle also supports a bullish stance.
Emerging upside momentum, according to the MACD indicator as well as upwards movement of the On-balance Volume indicator, also offers support.
Share Information
| Share Code | XLK |
|---|---|
| Market Capital (USD) | 71.7 billion |
| One Year Total Return | 38.21% |
| Return Year-to-Date | 20.17% |
| Current Price (USD) | 230.09 |
| 52 Week High (USD) | 238.14 |
| 52 Week Low (USD) | 159.50 |
| The ETF has experienced a strong run over the previous year supported by strong AI demand. Various technical indicators support further upside. | |
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and Position | ETN US - Take profit (Close the position) |
LRCX US - Exit trade (Close the position) |
BALL US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 297.69 | 79.11 | 61.71 |
| Current | 348.49 | 73.14 | 66.81 |
| Movement | +17.1% | -7.5% | +8.3% |
| We suggest taking an early profit on this trade. | We have opted to exit the trade on deteriorating technicals. |
A broadening bottom pattern remains attractive. The stock remains above its 200-day SMA, and upside price momentum is supportive. Our profit target is $69.00, with a trailing stop-loss of $63.80. Exit the trade by 7 February 2025. |
| Share Name and Position | ABSI US - Buy (Continue to hold) |
C US - Buy (Continue to hold) |
DPZ US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 3.79 | 61.71 | 416.77 |
| Current | 4.02 | 63.97 | 429.38 |
| Movement | +6.1% | +3.7% | +3.0% |
|
A price developing an inverted head and shoulders pattern remains of interest. Remains below its 200-day SMA, and muted downside price momentum is supportive.
Our profit target is $5.50, with a trailing stop-loss at $3.30. Exit the trade by 7 November 2024. |
A price action at a confluence of the 200-day, 200-week and 200-month SMAs remains of interest. Remains above its 200-day simple moving average. Fading downside price momentum supports the trade strategy.
Our profit target $71, with a trailing stop-loss at $60.30. Exit the trade by 3 January 2025. |
A price bouncing off its 200-week SMA remains of interest. Remains below its 200-day simple moving average. Fading downside price momentum supports the trade strategy.
Our profit target $482, with a trailing stop-loss at $402.80. Exit the trade by 20 November 2024. |
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