The technology sector is oversold and should trend up to retrace some of the recent downtrend
The technology sector is oversold and should trend up to retrace some of the recent downtrend.
In the chart, we show the 14 day relative strength has reached an oversold level and nearing the April low it reached before the short term downtrend stopped and reversed into an uptrend.
We also overlay a linear regression channel over the price trend to illustrate the price has trended down to the lower range, which is another indication of a short-term oversold downtrend.,
The linear regression channel is a three-line technical indicator used to analyze the upper and lower limits of a price trend. Linear regression is a statistical measure used to predict the likely future direction from past data. Institutions and hedge funds use it to identify potential overextended up- or down-trending prices.
However, if this is the early stage of a deeper downtrend, we'll eventually see the tech sector break this recent low.
Looking deeper into the tech sector, the percent of stocks in the S&P Information Technology sector above their 50 day average suggests the average stock is at mid-field, so they could certainly decline a lot more, or this could be the stopping point where they reverse back up.
Quantitative mathematical measures of price trends are probabilistic, never a sure thing. We use these measures like a windsock, indicating the sector is now at an inflection point of trending back up and resuming the primary uptrend, or watching for indications of a new deeper, longer lasting downtrend.
Mike Shell is the founder, president, and chief investment officer of Shell Capital Management, LLC, and the portfolio manager of Asymmetry® Managed Portfolios. Shell Capital Management, LLC, is a registered investment advisor focused on asymmetric risk-reward and absolute return strategies. Shell Capital provides investment advice and portfolio management to clients with separate accounts at Goldman Sachs Advisor Solutions with an investment management agreement. The observations shared on this website are for general information only and should not be construed as investment advice to buy or sell any security. This information does not suggest in any way that any graph, chart, or formula offered can solely guide an investor as to which securities to buy or sell, or when to buy or sell them. Securities reflected are not intended to represent any client holdings or recommendations made by the firm. In the event any past specific recommendations are referred to inadvertently, a list of all recommendations made by the company within at least the prior one-year period may be furnished upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on the list. Any opinions expressed may change as subsequent conditions change. Please do not make any investment decisions based on such information, as it is not individualized advice and is subject to change without notice. Investing involves risk, including the potential loss of principal, which an investor must be willing to bear. Past performance is no guarantee of future results. All information and data are deemed reliable but are not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise the implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. If this website contains information regarding options trading, please read the Characteristics & Risks of Standardized Options, also known as the Options Disclosure Document (ODD). Options involve risk and are not suitable for all investors. The views and opinions expressed in Asymmetry® Observations and Asymmetric Investment Returns are those of the authors and do not necessarily reflect the position of Shell Capital Management, LLC. The use of this website is subject to its terms and conditions.