Recent market activity has seen an increased level of volatility across many sectors, however, a key monthly chart may be suggesting that any downside risk is limited.
The monthly chart of the Global X Robotics & Artificial Intelligence ETF is one interesting sector chart that has caught this authors eye. Over the past three months, Robot & Artificial Intelligence ETF has grown from around $43 to a recent high at the start of May, of close to $50. It is noteworthy that the relative strength index (RSI) reading in April, was 59, indicating price was overbought. Then, price pulled back to find support near the $45 level, where the RSI reading in May also reported overbought conditions at 66.
The point this author is getting at is that there appears to be an interesting rotation away from hot holdings like tech and into sectors such as Robots & Artificial Intelligence, deemed as more defensive. Thus far, that rotation appears to be playing out in the form of the normalized pattern the RSI is displaying.
What is further interesting in regards to the aforementioned chart is that a sustained move under the $45 level would probably cause the RSI to register an oversold reading below 30. Thus, with a bullish RSI divergence in play, downside risk appears to be limited.
In short, the monthly chart of the Global X Robotics & Artificial Intelligence ETF is suggesting price has put in a near-term floor around the $45 level and downside risk is limited. The attractive entry point makes it a sector worth watching for those looking to increase their exposure to defensive elements.