Time To Get Social?

Here's the ratio chart of the Social Media ETF (SOCL) relative to the Technology Sector SPDR (XLK). The reason this chart is so interesting to me right now is that it begs the question of whether we're going to see a meaningful rotation out of leading Tech subsectors like Software and into Social, which remains roughly 15% off of its March 2018 highs.

This is the fourth test of long-term support near 0.40-0.41 and momentum has put in a sizeable bullish divergence. With prices reversing sharply from their recent lows and breaking back above support and the downtrend line from its year-to-date highs, near-term mean reversion looks likely.

Click on chart to enlarge view.

From a pure reward/risk perspective, I'd much rather be long than short at current levels. Due to its counter-trend nature it's a lower-probability setup, however, the reward/risk would suggest that this trade is at least worth a look as long as prices remain above their recent lows of 0.402.

For Premium Members we've done a deep dive into the sector to assess whether this rally has legs and what the best way to play it is.

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Allstarcharts Team