As the markets work their way back to record territory, one top technician warns of looming pain for this year’s best performing sector – technology.
With the tech sector up nearly 18% this year, there has been some rotation in recent weeks into more defensive sectors. This is only naturally after such a big rally as investors start to take some risk off the table.
According to my favorite market technician, Carter Worth “XLK is not progressing and the relative performance is down, even as it makes new highs. So the problem with that is it’s still crowded and yet it’s no longer paying. … It’s no longer the reward that one would think.”
Another concern is the relative performance of the seminconductor sector, typically a canary in the coal mine. The relative performance of this key sector has broken a two year trendline and Worth think that spells trouble ahead.
The Options Action traders suggested buying a $75-$70 put spread in XLK.
Watch the video below and trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
