On Monday, we shared how to apply my scorecard system to the S&P 500.

To recap, the system can assign a score to a market anywhere from -3 (most bearish) to +3 (most bullish).

Right now, the S&P 500 is firmly in +3 territory. That’s as bullish a score as the market can get from my system.

Now if you wanted to stop right there, and simply buy an ETF that tracks the S&P 500’s performance, you could.

But if you want to take things to the next level, then listen up…

We can also apply the scorecard system to different sectors like tech, financials, utilities, and so on…

Today, we’re going to be doing just that.

The Tech Sector Is Ready to Break Out

We’re going to take a deeper look at the tech sector ETF, ticker symbol XLK.

XLK is made up of tech sector giants like Microsoft, Apple, Nvidia, and Broadcom.

And so far on a year-to-date basis, XLK is up over 11%.

Since February 23, however, XLK has been trading in a sideways range and could be ready to break out.

Let’s examine XLK’s price chart below. We’re going to apply my scoring system to the ETF and then discuss its chart pattern, too.


First off, we can assign XLK a clear +3 rating – as bullish a rating as my system can give.

That’s no surprise given how stocks like Nvidia have dominated the conversation this year.

What gives XLK its +3 rating has to do with the moving averages on the chart.

XLK gets two points for being above both the 20- and 50-period moving averages.

The final point comes from the slope of the moving averages. If you take a close look at the chart, you’ll see that the moving averages are both sloping upwards.

A positive slope to the moving averages nets us another positive point.

If the slope were neutral, then there would be no point given. And finally, if the moving averages are sloping downwards, then we’d actually subtract a point from the final total.

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There’s Also a Bullish Chart Pattern…

On top of XLK’s +3 rating is the bullish chart pattern the ETF is tracing out.

This pattern is known as a high base. It’s a trend continuation pattern and should be getting ready to break out any day.

We’re looking for a strong break above the upper resistance line of the pattern.

So long as we get that break without violating the lower boundary of the pattern, we have a valid high base.

If we get a clear upside breakout, XLK could travel to about $225.50 next. That’s about a 6.4% move from current prices.

Happy trading,


Imre Gams
Analyst, Market Minute