Fund Significantly Boosted its Nvidia Stake While Slicing Its Apple Stake in June

Source: TradingView.com
Source: TradingView.com

Key Takeaways

  • The Technology Select Sector SPDR Fund, which in June significantly increased its position in Nvidia and sliced its position in Apple, is down 6% this month amid concerns about the health of the U.S. economy.
  • XLK broke down below the 200-day moving average during last Monday’s global selling rout but staged a recovery to reclaim the indicator by Thursday’s market close.
  • The ETF’s price may encounter support around $200 and $194, while running into resistance near $210 and $218.

The Technology Select Sector SPDR Fund (XLK) is down 6% this month amid a downturn for technology stocks.

The fund has seen a volatile start to August amid concerns about the U.S. economy following several recent reports pointing to a softening of economic activity. XLK’s recent rebalancing in June, which increased its holding in artificial intelligence (AI) darling Nvidia’s (NVDA) from around 6% to 19% and reduced its allocation in iPhone maker Apple’s (AAPL) from about 22% to 5%, has also weighed on performance.

The rebalance means the fund didn’t fully capitalize on Nvidia’s impressive gains in the first half of year but realized a greater portion of its sharp correction in recent months. Since the June 21 rebalancing, Nvidia has dropped 17%, while Apple has gained 4%.

Below, we’ll take a closer look at the technicals on XLK’s chart and identify important price levels that investors will likely be watching.

Fund Reclaims 200-Day Moving Average

Since topping out in early July, the ETF’s price has fallen as much as 20% from its record high as investors booked profits in mega-cap tech stocks. More recently, the fund broke down below the closely watched 200-day moving average (MA) during last Monday’s global rout but staged a recovery to reclaim the indicator by Thursday’s market close.

Amid the possibility for further volatility within the technology sector, investors should monitor these important support and resistance levels on XLK’s chart.

Support Levels to Watch

The first key support area to watch sits around $200, currently just below the 200-day MA, where the price will likely encounter buying interest near the psychological round number and a minor peak that formed in the early part of the fund’s trending move between April and July.

A failure to hold this level could see the ETF revisit lower support at $194, an area on the chart where investors could look for entry points near a horizontal line connecting the December 2023 swing high with comparable lows in April and August. This area also lies in close proximity to an uptrend line stretching back to the October 2022 low.

Resistance Levels to Monitor

Initially, the fund’s price could run into overhead resistance near $210, where sellers could look to take profits around a trendline that links a period of March consolidation with a minor June pullback and the Aug, 1 pre-gap trading level.

Further bullish upside may drive a move to $218. This area could find resistance around the May peak and the daily high of several trading sessions in late July and early August, with the region also sitting just below the downward sloping 50-day MA.

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