In keeping with our recent theme of monitoring noteworthy technical developments throughout the different Dorsey Wright Money Management Investment Products, we would like to point a a few things we noticed on the PowerShares DWA Technology Momentum Portfolio (PTF). This underlying index is composed of at least 30 common stocks of companies in the technology sector with powerful relative strength characteristics.
We are just using this traditional point and figure analysis as a simple way of monitoring supply & demand, not necessarily to make an actual buy or sell recommendation which are instead done using our RS matrix models. The key point not to overlook is that often times technical developments on traditional point & figure charts are noteworthy and can help give us an idea of where pockets of relative strength may begin to increase or decrease.
PowerShares DWA Technology Momentum Portfolio (PTF): (Point & Figure)
As we can see on the point and figure chart of PTF, there was a double bottom pattern break on 10/2 which was confirmed with the move below 33.50. In other words, this previous level of demand failed to hold as sellers (supply) overwhelemed buyers (demand). This pattern has a potential measured move price objective of 30.00. Furthermore, we can also note the long term uptrend line on which has been intact for an extended period of time. Looking back we can see the number of occasions this line has held as firm support. Let’s think about that for a second and apply it to our concept of supply and demand. Ultimately, this is the concept we believe is what moves stock prices. In other words, this uptrend line has been an area where buyers have stepped in and provided the market with a firm bid to overwhelm the sellers (or supply of stock) in the past. The longer a trend line has been intact and the more times it has held typically means it’s more important to monitor.
Dorsey Wright is the index provider for PTF
This research article gives us a brief overview regarding the current point and figure technical set up of the PowerShares DWA Technology Momentum Portfolio ETF. As we’ve pointed out above, PTF is currently sitting just above an uptrend line which has been an area of demand on previous occasions. It will be interesting to see if this level can once again prove itself as it has in the past. Price levels such as this which have been tested and held firm on numerous occasions can sometimes lead to heightened levels of volatility should they be breached.
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