This week’s Chart of the Week features the XLK ETF (S&P 500 technology sector) after a remarkable week in large-cap technology company earnings. On Friday, XLK closed just 2.30% away from its all-time high during March 2000. That being said, the technical overview of XLK is suggesting that the ETF is ready for a pullback. We are utilizing the standard deviation channel on a 90-day graph for XLK to determine a potential pullback to $57.41.

After reaching a high of $62.71 on Friday, XLK reversed off the trendline indicated above and this appears to be a near-term top. Additionally, the relative strength index for XLK exhibited a 22 point gap upward putting the ETF in overbought territory.  

To the downside, we look for $60.80 and $59.08. In the extreme case, $57.41 could be reached, however, our target on this trade is the $59.08 level.

Overall, we are not expecting a massive crash for technology stocks like we saw in the early 2000’s, however, the sector should see a slight correction before making its next move higher.