A Tech Pick That Won’t Wait

01/17/2011 10:20 am EST

Focus: STRATEGIES

Thomas Aspray

, Professional Trader & Analyst

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Chart Analysis: Hutchinson Technology Inc (HTCH) is a small cap company that was included in last week’s article, Seven Tech Picks for 2011. This company produces the suspension assemblies for disk drives, supplying companies both in Asia (China, Thailand, Japan) as well as in the US.

HTCH had it’s highest close since October 19 on Friday (Jan. 14), which requires a change to last week’s recommendation.

  • HTCH closes Friday above short-term resistance in the $3.90-$4.00 area. This likely completes the weekly bottom formation

  • Next barrier at $4.40 with first upside target at $6.00

  • Weekly MACD-Histogram is positive, having formed a positive divergence in 2010

  • Initial support now at $3.45-$3.50

Select Sector SPDR - Technology (XLK) has a very bullish weekly chart, but is not far below some key chart and Fibonacci targets.

  • Upper trend line from early 2010 highs at $26.30

  • The 1.272 Fibonacci target at $25.29 exceeded with the 1.618 target at $26.72

  • Upper trading channel at $27.50

  • First good support at $25.50

What It Means: Friday’s close in HTCH makes a pullback to support much less likely now, so I would look to buy at a higher level. Technology sector ETF XLK looks strong and should reach its next targets, which are about 2% above current levels.

How to Profit: I would buy HTCH at $3.88-$3.98 with a stop $3.33. No recommendation for XLK at this time.

Tom Aspray, professional trader and analyst, serves as senior editor for MoneyShow.com. The views expressed here are his own.

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