The information technology sector closed on Friday May 23, 2008 at $35.01

The high over the last year was $40.30 on November 30, 2007 and the low was $29.31 reached on March 17, 2008. From the peak to the trough that represents a drop of –23.9% for the technology sector vs. the TSX which dropped –5.4% and the S&P 500, which dropped –13.8%. Year-to-date the TSX is up about 6% and the S&P is down about –6% while the technology sector is down about –8%. Since March 17th the TSX is up over 13% and the S&P is up about 8% while the technology sector is up over 17%. Like healthcare & financials, is this a potential longer-term trend reversal with some sustainability?

The chart suggests that we could be seeing a shift in the trend from a negative downward channel to a positive upward channel. The current price crossed the 50-day moving average on April 1st. It has managed to maintain its status above the 50-day moving average since then. We have seen the start of an upward channel forming represented by the lower trend line showing rising bottoms and the upper trend line showing rising tops.

Some of the Canadian Companies you may recognize in this sector are Celestica Inc., CGI Group Inc., Nortel Networks Corporation, Research In Motion Limited and MacDonald, Dettwiler and Associates Ltd..

Technically, we are getting a buy signal but be careful because Celestica and Research In Motion have driven the move. Although it could be argued both companies are deserving for more fundamental reasons, you need to expect volatility especially given the sensitivity of technology to new developments and the old adage “sell in May and go away”. It will be interesting to see how technology reacts if we see a seasonal anomaly play out this year or Apples iPhone comes out with any new developments.