For most of the past year, the most actively traded companies like Apple Inc. (AAPL) and Facebook, Inc. (FB) have dominated the financial media and the screens of retail traders. One of the groups that has been relatively under-followed is U.S. mid-cap companies. Based on the charts discussed below, it appears that 2020 could be the year for targeted exposure to the mid-cap segment.
iShares Core S&P Mid-Cap ETF (IJH)
Exchange-traded products such as the Core S&P Mid-Cap ETF (IJH) are the products of choice for investors who are interested in gaining exposure to a certain sector or market segment. As you can see from the chart below, the price of the mid-cap fund has recently broken out of a well-defined ascending triangle pattern and looks poised to make a run higher.
For those who follow technical analysis, it is interesting to note how the 50-day and 200-day moving averages have trended sideways for months and how they have started to trend higher following the breakout. The upward shift in the long-term moving average is evidence that the bulls are in control of the long-term trend, and many bulls will likely use the nearby support levels for determining the placement of their stop-loss orders. Based on the height of the pattern, we'd expect traders to set their short-term target prices near $215.
Teledyne Technologies Incorporated (TDY)
With a weighting of 0.72%, Teledyne Technologies Incorporated (TDY) represents the largest holding of the IJH ETF. As you can see from the chart below, the stock has been trading with an extremely strong uptrend.
The recent break beyond the short-term period of consolidation near $345 (shown by the horizontal trendline) suggests that the next leg of the uptrend is underway. Followers of technical analysis will expect the upward momentum to continue until the price closes below the influential support level market by the ascending trendline and the 50-day moving average at $343.60.
Tyler Technologies, Inc. (TYL)
Another mid-cap stock that is trading within a major uptrend is Tyler Technologies, Inc. (TYL). While some traders may feel like they missed the move higher, the recent break beyond $292 suggests that the next leg higher is just beginning.
As mentioned above, the upward shift of the long-term moving averages is a bullish sign that also suggests the long-term trend higher is in the early stages. From a risk-management perspective, active traders will most likely look to buy as close to the psychological $300 mark and then place stop-loss orders below the 50-day moving average ($286.40), the ascending trendline, or the 200-day moving average ($247.03), depending on risk tolerance and investment horizon.
The Bottom Line
Mid-cap companies in the United States have been relatively under-followed by retail investors over the past year. While it may seem like it is late in the uptrend to open a position, the charts discussed above suggest that the long-term uptrend has lots of room to the upside and that the next leg higher could just be getting started.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.