Chart Advisor: Tech Stocks Surge

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Friday, 5th May, 2023

1/ Tech Stocks Surge

2/ Head Fake from the 5-Year?

3/ A Bellwether on the Brink

4/ Crude Oil’s Line in the Sand

Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.

1/ Tech Stocks Surge

Tech stocks enjoyed a massive rally today, with the technology sector SPDR (XLK) clawing back losses from earlier in the week to book its highest weekly close in over a year. Microsoft (MSFT), Apple (AAPL), and other mega-cap heavyweights continue to lead the charge for technology and growth-oriented indexes.

Here is a daily chart showing XLK on the brink of completing a bearish-to-bullish reversal pattern:

Source: All Star Charts, with data provided by Optuma

Notice how the long-term moving average (MA) has flattened out and curled higher over the past few months, supporting the bullish price action.

Stock market bulls would like to see follow-through next week to signal a decisive upside resolution for this critical index. Large-cap tech stocks continue to show impressive leadership and resilience.

2/ Head Fake from the 5-Year?

The five-year U.S. Treasury yield is showing a potential failed breakdown.

Here’s a dual-pane chart of the five-year and 10-year Treasury yields:

Source: All Star Charts, with data provided by Optuma

Yields across the yield curve remain elevated, holding within a tight range after peaking last fall. But unlike longer-duration yields, the five-year broke to fresh lows yesterday. However, those fresh lows were short-lived as the five-year turned higher over the course of today’s session.

Was yesterday’s breakdown simply a false start, or did we witness a failed breakdown amid a longer-term uptrend? We’ll have to wait for the market to respond, but it’s unlikely that the 10- and five-year yields resolve in opposite directions.

3/ A Bellwether on the Brink

When it comes to the materials sector, Freeport-McMoRan (FCX) is an excellent barometer stock to measure the health of the entire group. 

When times are good, this stock tends to participate to the upside. The opposite is true when commodities and their related equities are under pressure.

As you can see, price threatened to break below a shelf of former lows this week:

Source: All Star Charts, with data provided by Optuma

The AVWAP from last year’s lows coincides with the same level at approximately $35, establishing a critical area of interest.

Buyers would need to step in to avoid a downside resolution from this short-term topping pattern. If bears take control at this level, it could lead to increased pressure for commodity-related stocks and cyclical areas of the market. 

For now, bulls are defending this key support zone as FCX closed 3.5% higher today.

4/ Crude Oil’s Line in the Sand

When we review our commodity charts, we’re noticing more topping formations underway than bottoming patterns. 

Crude oil is front and center as the energy sector—commodities and their associated stocks—remains one of the weakest areas of the market.

Here is yesterday’s chart of crude oil futures:

Source: All Star Charts, with data provided by Optuma

After yesterday’s abrupt selloff, buyers stepped in and drove prices 4% higher today, back above $70 per barrel.

What does this tell us about the rest of the energy space?

The energy sector could avoid a breakdown as long as crude oil holds above yesterday’s low. On the other hand, a decisive breakdown below $65 per barrel could trigger broader selling pressure across the sector.

Originally posted 5th May 2023

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