Market snapshot
The technology sector continued to weaken on Monday, sitting roughly 12% below its October 52-week high, with Wolfe TMT Desk reporting investor outflows surged to historically high levels last week. That withdrawal of funds has coincided with broad selling pressure across multiple tech subsectors.
Subsector dynamics
Software stocks briefly staged a relief rally but were unable to test the 50-day moving average and have since turned lower, appearing to track back toward recent lows. Semiconductors, which had been a relative bright spot earlier, have also succumbed to selling pressure.
Wolfe highlighted the XSD Equal Weight Semiconductors ETF as illustrative of the move: the ETF has dropped 13% since its mid-February peak. The firm noted that a decline below the 200-day moving average for the semiconductors group could send the subsector toward its November low.
Breadth and technical backdrop
Technical breadth within technology is thin. Only 29% of technology stocks are trading above their 50-day moving average, indicating that uptrends have become scarce across the sector.
Relative winners
Despite the broad weakness, Wolfe pointed to two stocks that have displayed relative strength. SolarEdge Technologies (NASDAQ: SEDG) has climbed 65% over a two-week span and, according to Wolfe, may be positioned to extend gains toward the low $60 range where resistance has been identified.
The firm also named A&E Television Networks (ATEN) as the strongest software name in its coverage, describing it as perhaps the only software stock moving higher this year. ATEN is approaching a potential breakout through $22 to all-time highs, in Wolfe's view.
Investor behavior
Wolfe observed that investors have not been purchasing dips within the technology sector, and the lack of buying interest appears to be present in other areas of the market as well.
Bottom line
The technology complex is under pressure, with soft technicals and heavy outflows. Within that environment, Wolfe identifies SEDG and ATEN as outliers showing notable relative strength, but broader participation remains limited.