The strong growth characteristics found throughout the technology sector make it one of the most lucrative areas of the market. As you know, business areas such as hardware, storage, software, communications and IT services make up an immense portion of the world we know today. While 2019 has been favorable for technology investors so far, based on the charts discussed below, the move higher could only be getting started.
Technology Select Sector SPDR Fund (XLK)
One of the most popular tech-related funds used by investors interested in increasing exposure to the broad technology sector is the Technology Select Sector SPDR Fund (XLK). With 68 holdings from across the tech sector and total net assets of $20.15 billion, the fund allows investors to take a strategic or tactical position in a targeted fashion without concern for liquidity.
As you can see from the six-month chart below, the fund has been trading along a clearly defined trendline, which has consistently acted as a guide for traders looking to determine the placement of their buy and stop orders. The recent crossover between the long-term moving averages (shown by the blue circle) will likely be used by followers of technical analysis to mark the start of a long-term uptrend. Position traders will likely look to protect their long-term holdings by placing stop-loss orders below $69.54 in case of a drastic change in sentiment.
Alphabet Inc. (GOOG)
When it comes to technology, one of the giants in the room is undoubtedly Google parent company Alphabet Inc. (GOOG). Taking a look at the chart, you can see that the price has recently broken above the resistance of the 200-day moving average and has subsequently tested to see if it would act as a strong area of support that most technical traders would expect, which does in fact appear to be the case. Notice how the 200-day moving average has acted as a reliable guide for determining the placement of buy and sell orders.
The move higher over the past couple of months has triggered a bullish crossover between the 50-day and 200-day moving averages known as the golden crossover. Followers of technical analysis generally use this common long-term buy sign to mark the start of a major uptrend. Most will likely look to buy near current levels and protect against a move lower by placing stops below $1,132.60.
MongoDB, Inc. (MDB)
One of the most dynamic and exciting tech stocks to watch in today's market is MongoDB, Inc. (MDB). The strong price pattern shown in the chart below clearly shows why it is a favorite among investors and that the uptrend could still be in its early days. The breaks above the dotted trendlines show that the momentum is clearly in the favor of the bulls and lays out tactical positions for stop-loss orders in case of a sudden sell-off. Based on this chart, traders will likely hold a bullish outlook for many weeks or months to come.
The Bottom Line
Tech stocks are always popular among active traders and long-term investors. Based on the charts discussed above, it is clear that the long-term uptrends could just be getting underway and that many active traders will use the identified support and resistance levels for determining the placement of their orders.
At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.