Last week, I opined a technical piece called, Momentum Divergences Flashing Warnings Signs for QQQ and FAANG Stocks, which highlighted the near- and intermediate-term divergences that were and still are developing in the big-cap technology sector.
Today I follow up with a look under the hood and the technical set ups in Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), the two largest components of the NDX-100 and QQQ.
Apple has been perched above the upper boundary line (204.50) of its February-August bullish channel for almost two weeks, which, among other things, is a sign of excellent relative strength but also could be a sign of approaching upside exhaustion. That said, as long as AAPL remains above key near-term support from 205.20 down to 204.30, let's consider its post-earnings action as a sign of excellent relative strength.
From a pattern perspective, however, all of the action off of the June 25 pivot low at 180.73 into the 210.95 high on August 13 has the look of a completed up-leg. If accurate, this means we should brace for a price rollover and subsequent break of 205.20-204.30 in the upcoming hours and days that will trigger a significant correction in AAPL – from a 12% piece of the QQQ pie.
Meanwhile, let's notice that Amazon.com appears to be ricocheting to the downside after about one week of bumping up against its upper boundary region of the December 2017 to August 2018 bullish price channel. Inability of AMZN to regain 1918-1920 resistance will argue increasingly that it is vulnerable to downside continuation from the upper channel region towards key initial meaningful support in the 1770-1760 area.
Should such a scenario unfold, AMZN's 10.8% piece of the QQQ will be in a negative technical position.
And if the two largest components of the QQQ's are compromised technically, chances are the QQQ itself will be very much on the defensive.
