XLK: Risk from a daily bearish thrusting line

Technology (XLK) recovered from Friday's (11/14) big opening gap lower, which tested the prior Friday's hammer low at 281.59 as support. However, similar to the S&P 500 and NASDAQ 100 (see prior post), XLK formed a two-day bearish candlestick pattern called a bearish thrusting line that could provide an overhang for the sector entering this week.

A thrusting line is a bearish continuation candlestick pattern occurs when a sharp rally follows an opening downside gap and leads to a close within the prior candle's dark real body, but this close is below the mid-point of the real body. Note that if Friday's close was above the mid-point, a bullish piercing pattern would have formed instead.

In addition to the daily bearish thrusting line, XLK closed below its 13-, 26-, and 40-day moving averages (DMAs) from 288.69 up to 293.21 (Chart 1). A failure to decisively regain these DMAs, would provide a tactical overhang for XLK, with the 281 to 278 area an important risk management support zone for the sector (Chart 2)

Chart 1: Technology (XLK): Daily candlestick chart

Chart 2: Technology (XLK): Weekly candlestick chart