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A technical look at the market leaders

February 11th, 2010 · No Comments

What do the charts say about Apple, Google, Amazon.com, and IBM?    
One of the key groups that has been leading the markets higher over the past several months has been the large cap technology stocks. Leadership from this group is healthy, as it shows an appetite for risk-taking in new and emerging technologies from speculators. Market leadership from innovative companies is healthy, rather than leadership coming from ties to a falling currency or a flight to safety. 

Apple (Nasdaq:AAPL) is one company that has been regarded as a market leader over the past few years. AAPL has managed to recover all of its bear market declines and was recently trading at a new all-time high. However, despite the longer term strength, AAPL has been showing signs of weakening recently. It closed under its 50-day moving average in January and has failed to reclaim it in subsequent trading. It has also transitioned into a lateral trend after a strong rally over the past year. While AAPL hasn’t broken down, it is vulnerable to further weakness. The $190 area appears to be a key level of support and has contained prior pullbacks. (For further reading, check out Support & Resistance Basics.)

Source: StockCharts.com


Google (Nasdaq:GOOG) is another stock widely regarded as a market leader. While GOOG has erased much of its bear market declines, it has underperformed AAPL and remains off its all-time highs. It also fell beneath its 50-day moving average in January, as the general markets experienced some weakness through earnings season. GOOG is currently attempting to stabilize near $525 and is also vulnerable to further weakness. If GOOG were to continue falling, the $500 level, which is near the 200-day moving average, could act as the next support level.

Source: StockCharts.com


Amazon.com, Inc. (Nasdaq:AMZN) is a great example of an innovative company becoming a market leader. Much like AAPL, the company has been leading the current rally and  also recently traded to new all-time highs. While AMZN has outperformed over several months, it has been suffering through a correction over the past few weeks. AMZN completed a double top earlier this year and is threatening to fill a bullish gap it created last autumn. The $114-$116 area has been defended by the bulls and remains a key level to watch. (For more insight, check out Analyzing Chart Patterns.)

Source: StockCharts.com


International Business Machines (NYSE:IBM) is one stock that isn’t often mentioned when talking about a market leader, but stepping back and looking at the longer term chart it becomes clear that this has been one of the strongest of the large cap stocks. It also recently traded above its prior bull market highs and was only a few points from new all-time highs. But despite the longer term strength, this is another stock suffering through some near-term weakness. It also sliced through its 50-day moving average and is attempting to stabilize near a prior pivot area. The 200-day moving average looms below and could act as a price magnet over the next few weeks.

Source: StockCharts.com

Bottom Line
While the majority of these stocks have not technically broken down, they are all suffering through bouts of near-term selling. As market leaders, it will be difficult for the general markets to gain much traction without their participation. Most of these stocks are near support levels that could lead to a respite in the selling. However, it’s possible that these levels will fail, leading to the formation of a more serious topping pattern. This would likely lead the markets lower as a deeper correction sets in. It is too early to know what the outcome will be, but these stocks should certainly be watched by traders.

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Tags: Technical Analysis