I wanted to take a moment to see how far we’ve coming off the ’08 lows to potentially see what road bumps could be coming down the road. The AMEX networking index has been a strong performer and showed up on my sector scan on Friday, but I tend to think it’s closer to a top than decent buying opportunity. There seems to be a little bit of room for this to run higher, indicated by the measured move from the bottom of the cup to the breakout, then you add that move to the breakout to determine a potential top. Given that many techs move together, it’s possible to look at the networking sector as a microcosm of the tech sector.
What we could be setting up for is one last climax run on the markets, that would coincide with a throwback from the ’07 highs. One other perspective is if we don’t get rejected at this important resistance level, we could be setting up for a sideways year as we digest the last 2 years of gains and then attempt another breakout. The odds of it succeeding would greatly increase if the market has some time to digest what many has labeled “the rally that refuses to pullback”. Click on all charts to enlarge.
If you’re trading this sector it’s time to be nimble.
Disclosure: No positions