During earnings season, when it comes to the tech sector, it is easy for the major players such as Alphabet Inc. (GOOG), Facebook, Inc. (FB) and Amazon.com, Inc. (AMZN) to dominate the spotlight. It is also extremely common for companies such as the ones mentioned above to dominate the holdings in tech-focused exchange-traded products.
For this article, we've chosen to focus on sub-segments of the tech sector where the portfolio holdings in the major players tend to be reduced while remaining targeted in an area that is growing fast and worthy of addition to any portfolio.
SPDR S&P Internet ETF (XWEB)
Sub-industries within the tech sector such as internet services and infrastructure as well as interactive media have been benefactors of reliable increases in demand over the past decade, and they tend to fly under the radar with most retail investors. For those seeking a strategic or tactical position at a more targeted level than traditional tech investing, one exchange-traded fund (ETF) that could be worth a closer look is the SPDR Internet ETF (XWEB).
As you can see from the chart below, the price has recently moved above the resistance of its 200-day moving average and a key horizontal trendline. The breakout has resulted in a bullish crossover between its 50-day and 200-day moving average, known as a golden crossover. This popular long-term buy signal often marks the beginning of a major uptrend, and the recent bounce off of nearby support will likely be used to confirm that the bulls are in control of the momentum. Bullish traders will most likely look to add to their positions near current levels and protect against a sell-off by placing stop-loss orders below $87.21 in case of a sudden shift in sentiment.
SPDR Kensho Smart Mobility ETF (XKST)
Another niche segment of the tech sector that has been gaining attention thanks to rapid innovation is smart transportation. We're referring to those companies that are behind smart transportation in areas such as autonomous and connected vehicle technology, drones and drone technologies used for commercial and civilian applications, and advanced transportation tracking and optimization systems. One interesting ETF that could be worth a closer look for those looking to gain exposure to this niche segment is the SPDR Kensho Smart Mobility ETF (XKST).
Taking a look at the chart, you can see that the price has moved above the resistance of its 200-day moving average and that the move has triggered a golden crossover between the long-term moving averages. The proximity to major support levels and the recent moving average crossover suggest that the bulls are in clear control and that a significant move off of support could be in the cards given the lucrative risk-to-reward setup.
SPDR FactSet Innovative Technology ETF (XITK)
Another relatively under-followed tech ETF that could be worth a closer look is the SPDR FactSet Innovative Technology ETF (XITK). As the name implies, this fund's managers have positioned XITK so that it offers investors exposure to companies that offer leading-edge products and services while also demonstrating robust revenue growth. Holders of this fund are also particularly interested in exposure to the general rise in innovative tech across a diverse number of wide-reaching trends, which is offered due to the nature of its diverse number of holdings, presently standing at 95.
Taking a look at the chart, you can see that the price recently rose above a key level of resistance. The breakout suggests that the bulls are in control of the momentum and that prices could be headed higher over the weeks or months ahead.
The Bottom Line
For retail traders interested in technology, most attention goes to the largest players because those are entities that they are most aware of. However, niche funds such as those mentioned in the article above offer traders a different view than the one being steadily told in the media and currently look poised for a significant move higher.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.