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Tech sector could be nearing a correction

Major tech stocks are inching closer toward correction territory, defined as a decline of 10% or more from July highs. Over the past month, tech giants like Apple (AAPL), have seen share prices fall significantly. Yahoo Finance's Jared Blikre explains the downward trend seen in the technology sector.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

JARED BLIKRE: Guys, tech in a correction and a picture is worth a thousand words. I got the NASDAQ 100 month-to-date results, and you can see the tech heavy index, a lot of its components just really kind of mired in the red there. And if we take a look at the sector action in the S&P 500, as you were talking about energy, really the big standout of the month as it was all of last year, that's the only one in the green. To the downside, real estate and tech are the two worst off.

And if I pull up a chart of XLK-- this is a three-month chart-- you can see it has now broken below those August lows. And if I put a year-to-date on, before in the earlier hour I was charting some of the head and shoulder patterns that we're getting. Well, we are right at the Rubicon right now with the XLK.

And for that matter-- let me just go to the NASDAQ composite overall because that is also entering a very similar pattern. But in fact, it's a little bit farther down. It's actually broken down here. So all-- everything pointing to further downside action. And a lot of this, if you want to look-- if you think about the tech sector, one of the stalwarts, one of the biggest, most important stocks there is Apple.

Apple itself is breaking down. And let me just show you what's happening on a three-month basis with some candlesticks. You can see it has now punctured those August lows just like XLK has. So as Apple goes, tech tends to go, and that's what we're kind of seeing here.

I want to close with a look at energy versus tech because energy has been seeing a lot of love as we've been seeing. This purple line right here, this has been trending higher. That's, not surprisingly, energy. This cyan line right here, this has been trending lower. That is the tech sector. So some big divergences we're going to want to see play out here. When tech finally finds its footing again, is energy going to be the new leader, or does tech regain its number one slot? Guys.