A basket of under-the-radar tech stocks are hitting new highs in the second quarter, offering profits for observant traders and investors. These lesser-known issues don't get the press or attention of big tech's household names, but many are better positioned to thrive in the post-virus world than companies that sell smartphones or digital advertising because they offer services that have grown in demand in recent months.

This leadership list cuts across a number of tech sub-sectors, including telecommunications, internet, software, and peripherals. Stay-at-home orders have underpinned many of these rallies, making us more dependent on digital communications, recreation, and everyday business activities that include cyber-conferencing, document sharing, and virtual human resource management.

Chart showing the share price performance of Sea Limited (SE)
TradingView.com

Singapore-based Sea Limited (SE) offers digital entertainment and e-commerce services in Southeast Asia. It came public on the U.S. exchanges in October 2017 at $16.25 and entered a downtrend that posted an all-time low at $10.06 in May 2018. The subsequent uptick stalled near the opening date high at $16.99, giving way to a pullback that persisted through the rest of 2018. Buyers returned in force at the start of 2019, lifting the stock through a series of new highs.

The stock bounced back to the March 2020 high in the low $50s in April and broke out on May 5, carving a healthy uptrend that has now added another 23 points. The on-balance volume (OBV) accumulation-distribution indicator has lifted to a new high as well, underpinning the strong rally. The sky's the limit for this issue as long as the Asian virus recovery continues at the currently rapid pace, with potential for the stock to post a rapid advance into the triple digits.

CIEN
TradingView.Com

Ciena Corporation (CIEN) relinquished its household name status after the internet bubble broke in 2000. The network hardware and software provider hit an all-time high at a reverse split-adjusted $1,057 in the fourth quarter of that year and then crashed in a severe decline that bottomed out in the single digits in March 2009. A slow-motion recovery wave finally completed a 100% retracement into the 2007 swing high in April 2020, triggering an immediate breakout.

The uptick is now approaching resistance at the 200-month exponential moving average (EMA), which isn't likely to get mounted on the first attempt. As a result, a pullback to test new breakout support in the low to mid-$40s may be needed before a sustained uptrend. A bounce at or around that price level could be rewarding, with potential upside into the $70s, but tight stops make sense because a breakdown through that trading floor could set off additional sell signals.

Chart showing the share price performance of Ciena Corporation (CIEN)
TradingView.com

Israel-based AudioCodes Ltd. (AUDC) provides voice over internet protocol (VoIP) and data networking solutions. The stock opened on the U.S. exchanges in 1999 and hit an all-time high at $76.00 one year later. It then crashed through most of the decade, like Ciena, finally bottoming out at 92 cents in 2009. The subsequent bounce stalled above $8.00 in 2011, while a 2014 breakout attempt failed, yielding the second higher low since the bear market low in 2015.

A 2018 breakout attracted steady buying interest, reaching the upper $20s in January 2020. A 14-month low in March got bought aggressively, yielding a bounce to the high followed by a late April breakout. The stock has added about 10 points since that time and entered a rising channel that bodes well for additional upside. The uptick is now approaching the .50 retracement of the multi-year decline, with high odds that it reaches the .618 retracement level in the upper $40s. 

The Bottom Line

A modest number of mid-cap tech stocks are profiting from the pandemic and transition to work-at-home requirements, rallying above strong resistance levels to multi-year and all-time highs.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.