Monday, June 29, 2020

XLC Communications ETF Monthly Chart; Overbot; Negative Divergence; Double-Top; Upper Band Violation; Price Extended; Long-Term Top At Hand

The communications and healthcare sectors were the big winners in Q2 staging sharp rallies to new record highs. XLC is the communications ETF forming a double-top, or M Top. The RSI, stochastics and money flow are overbot or coming off overbot levels agreeable to a pullback. The red lines show negative divergence in play across all indicators so an epic top is formed. The current highs in XLC will likely not be seen again for many months or years.

The neggie d spankdown during February and March was a long-term top. There was no reason for price to come back up for another high, except, rich Uncle Fed printing more money and that is what happened in late March. Boooiiinnnggg. Stocks pop on more easy money creating the matching highs and double-top. Nothing has changed. The Federal Reserve has only served to dig a deeper hole for itself and the country. The red lines show universal neggie d as price makes a matching and higher high so this is another top on the monthly chart and long-term failure would be expected. XLC will move sideways to sideways lower for the foreseeable future. 

The pink box shows XLC in its strong upward trend but that petered out in the middle of last year. The 3-month rally higher right now is not a strong trend higher as per the ADX. Look for a potential Aroon negative cross which will signal the soggy times ahead. Check out that huge volume candle at the March lows. Price will need to come down to take a look at that level again. Price is above its moving averages so a mean reversion lower is on the table.

Price has violated the upper band so the middle band at 48.80 is on the table and the lower band at 41-42. There is lots of price support in this area. As the year plays out, do not be surprised to see XLC down at 41-42 and over time that will likely fail with price targeting the 28-32 area perhaps by year end into early 2021. Keystone does not own XLC long or short but will look to short it going forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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