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Technology Sector Approaching Terminal Velocity

By Candy MathesonStock MarketsJan 23, 2022 12:03AM ET
www.investing.com/analysis/technology-sector-approaching-terminal-velocity-200615594
Technology Sector Approaching Terminal Velocity
By Candy Matheson   |  Jan 23, 2022 12:03AM ET
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I last wrote about MicroSectors™ FANG+™ Index 3X Leveraged ETN (NYSE:FNGU) (an exchange-traded note that tracks 3x the daily price movement on an index of US-listed technology and consumer discretionary companies) in my post of December 21, 2021.

As you can see from the following monthly chart, it failed to recapture and hold above the 33.00 level, mentioned therein, and closed at 25.74 on Friday.

It's approaching a price support zone from 20.00 to 25.00. We may see it attempt to stabilize somewhere within this zone in the coming days.

If not, a drop and hold below 20.00 could be catastrophic for the Technology Sector.

FNGU Monthly Chart
FNGU Monthly Chart

The ten stocks that make up FNGU are shown on the following 1-year daily charts. They are, in order of the charts below: Meta Platforms (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), Alphabet  (NASDAQ:GOOGL), Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), NVIDIA (NASDAQ:NVDA), Tesla (NASDAQ:TSLA), Twitter (NYSE:TWTR).

Most of them are at or near price support, with the exception of TWTR, which is well below for the year.

10 Stocks Of FNGU
10 Stocks Of FNGU

The following daily ratio chart of the NDX:VXN ratio shows that a bearish moving average Death Cross formed several days ago, and price has fallen below major support of 500.

I noted in my post of January 21 that a Death Cross had also formed on the SPX:VIX ratio and that the 'sell the rip' traders had overtaken the 'buy the dippers.' The same is true for this ratio.

If the NDX:VXN drops and holds below 400, its next major support level sits at 300, followed by 250 and 200, respectively.

NDX vs VXN Chart
NDX vs VXN Chart

In conclusion, if FNGU falls and holds below 25.00, and if the NDX:VIX ratio falls and holds below 400, and if the ten FNGU stocks fall and hold below their near-term price support levels, I wouldn't be surprised to see FNGU retest the lower edge of its support zone at 20.00.

A drop and hold below 20.00 on FNGU and below 300 on the NDX:VXN ratio could be catastrophic for the Technology Sector.

Keep an eye on the price action and support levels on the SPX and SPX:VIX ratio described in the aforementioned post for possible corroborating clues in this regard.

Technology Sector Approaching Terminal Velocity
 

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Technology Sector Approaching Terminal Velocity

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Comments (6)
Fahad Afghan
Fahad Afghan Feb 20, 2022 8:06AM ET
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ejiro jokpo
ejiro jokpo Jan 23, 2022 8:19AM ET
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how do I invest my money in?
Gershom Zvi
Gershom Zvi Jan 23, 2022 2:59AM ET
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Any thoughts about $SQQQ shares ?
Solomon Lalani
Solomon Jan 23, 2022 1:34AM ET
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Thanks Candy.  It seems if stocks and especially NQ falls another 20%, there will be a lot of buyers...even if it's for a bear market rally!  It would be better for NQ to correct itself to .382 fib - around 12800 - than rushing too soon to be found catching the falling knife.  We will see
Lake Lot
Lake Lot Jan 23, 2022 1:28AM ET
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Support at her next job
Mike Lee
Mike Lee Jan 23, 2022 1:12AM ET
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Thanks Candy, what do you think the worst case Scenario is?  whats the next support below 20?
 
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