The XLK is a technology sector ETF which consists of 64 technology stocks in which APPL makes up 20% of the ETF, followed by MSFT, IBM, T, GOOG, VZ, ORCL.
The XLK is now down 5 days in a row, has an RSI-2 of 1.80 and only 13% of the stocks within the ETF are trading above their 10 day moving average.
MEAN REVERSION
Index ETF’s tend to be mean reverting vehicles in the short term, and normally when they are down for 5-6 consecutive days the probability of a 1-3 day bounce are high, you couple that with such a low RSI-2 reading and the low amount of stocks above their 10 day makes the probabilities of a bounce even higher.
THE TRADE
Here is the trade: own the XLK right around the $30 dollar level, with a stop .25 cents stop, and look for 30.65-30.80 has your target. For those who are more aggressive TECL is the 3x ETF, and the QQQ / TQQQ is also down 5 days in a row and has the same set up as the XLK.
