Technology may be poised to take the baton once again as sector leadership continues to rotate in classic bull market fashion.
After recent strength in areas like industrials, materials, and staples, tech is beginning to reassert itself, showing early signs of renewed momentum as investors position ahead of a pivotal earnings week. With four of the Magnificent Seven -- Microsoft, Tesla, Meta Platforms, and Apple -- due to report, the group has a fresh opportunity to reclaim leadership and set the tone for the next leg higher. That setup could prove frustrating for technology bears still holding out hope for continued disappointment.
Technology has lagged over the past month, with the State Street Technology Select Sector SPDR ETF down fractionally and ranking 10th among the 11 major S&P sectors. That underperformance, however, may be setting the stage for a surprise, as the technicals for several of these names are beginning to improve.
Microsoft appears to be in the process of putting a bottom in place, carrying much of the weight of the broader software space. After forming a double top near the round $550 level on the weekly chart, confirmed by bearish shooting star candles in August and October, the stock last week retested a prior double bottom breakout near $450 from last May.
The shares registered a bearish death cross on Jan. 22, though these signals often occur after most of the technical damage has already been done. Should last week's lows fail to hold, an open gap near the $400 level would present a logical downside target. That said, if support stabilizes, Microsoft could work its way back toward $550 in the second half of the year, implying roughly 18% upside from current levels. Remain bullish above $445.
Microsoft was trading around $472 Monday.
Tesla appears to be regaining its footing following the selloff triggered by a bearish shooting star candle at the round $500 level on Dec. 22. The stock bounced last week near the "well known" $420 level, before reclaiming its 50 day simple moving average on Jan. 22. Shares are now pressing up against a double bottom pivot at $454.40 and a decisive move above that level would also recapture the 21-day exponential moving average and help restore momentum. If the setup continues to improve, Tesla could work toward $580 by mid 2026, representing 30% upside from current levels. Remain bullish above $430.
Tesla was trading around $439 Monday.
Meta Platforms still trades 17% below its most recent 52-week high, even after a 6% advance on Jan. 22. The stock bounced off the round $600 level last week, carving out a bullish island reversal in the process. Its first test of $600 last November coincided with a gap fill from the May 9 session, reinforcing the level's technical significance. It is now back above its 21-day exponential moving average and notice how round number theory plays a pivotal role with a bearish shooting star candle at $800 on Aug. 15 and a bullish island reversal at $500 in April started its long ascent.
Jan. 22 marked Meta's strongest daily gain in seven months, making it the second-best performer in the Nasdaq 100, trailing only Datadog. This week, Meta could gravitate toward its 200-day simple moving average around $680, with a potential upside gap near $750 from Oct. 29 likely to be filled sometime early in the second quarter. That move represents roughly 14% upside from current levels. Remain bullish above $625.
Meta Platforms was trading around $672 Monday.
Round number theory has come into play for Meta stock.
My favorite play is Apple. The world's third-largest company now trades 14% below its most recent 52-week high and has just endured a rare eight session losing streak. Historically, every occurrence of that pattern has seen the stock move higher six months later. Apple reports earnings Thursday after the close, and its post earnings reaction has been negative for five consecutive quarters. The question for investors is: are we at peak pessimism?
On the daily chart, Apple filled the gap last Tuesday from the Oct. 17 session near the round $250 level. On Jan. 21, the stock printed a bullish harami candle after a 45-point decline from the Dec. 3 peak, suggesting selling pressure was abating.
That setup offers an attractive risk reward entry here. If recent lows hold, a double bottom base appears to be forming, with an add on opportunity above the $277.94 pivot. That base started with a bearish shooting star on Dec. 3. The stock could work toward $323 by year end, implying roughly 29% upside from current levels. Remain bullish above $237.
Apple was trading around $255 Monday.
A bullish harami candle last week after a 14% decline offers good risk/reward for Apple stock.
On the weekly chart, Apple is on an eight-week losing streak, with last week seeing a drop of 3%. The weakness began with a bearish shooting star candle in the first week of December, a session that closed 10 points below both its intraweek and all-time highs. That was the middle of an unusually tight three week stretch, with weekly closes separated by just 57 cents. Such coiling action often resolves in an explosive move. In Apple's case, this break was to the downside.
The stock is now testing a double-bottom breakout pivot at $250.10, within a pattern that traces back to a bearish evening star in the first week of January 2025. Notably, the low of that base was marked by a bullish piercing line candle, hinting at underlying demand. Also worth noting are the two weekly doji candles in December, which helped signal the onset of the latest corrective phase.
Apple’s weekly chart is retesting a break above the double bottom from early 2025.
At this potential change in character, Apple's improving technicals argue that the stock could be transitioning from repair to leadership.