For a couple decades now, investors have found themselves interested in buying into the rapidly evolving world of technology. Understandably, the vast majority of retail investors find themselves uncertain of where to start doing research. For some, one of the most strategic methods for learning is to investigate holdings of exchange-traded products.
Of specific interest for those interested in today's growth in areas such as artificial intelligence, advanced robotics, biotechnology, and virtual and augmented reality is to track the segment known as exponential technologies. In the paragraphs below, we'll discuss how active traders are positioning themselves to profit from the rise in this niche group and narrow down a couple of holdings that could be worth a closer look.
iShares Exponential Technologies ETF (XT)
As mentioned earlier, retail traders who are finding themselves interested in a specific market segment such as exponential technologies are often well served to look to exchange-traded products such as the iShares Exponential Technologies ETF (XT). The managers of the XT fund seek to gain exposure to companies that have products that are expected to displace older technologies, create new markets and potentially generate significantly positive economic benefits.
Taking a look at the chart below, you can see that the price has recently moved above the resistance of the 200-day moving average (red line), and the recent retest of the newfound support level suggests that the bulls are in control of the long-term momentum. The recent breakout beyond the previous swing high is a bullish sign that the price is clear to make a move higher, and many followers of technical analysis will likely maintain a bullish outlook until the price closes below either of the dotted trendlines of the 200-day moving average. Active traders will also likely keep a close eye on the 50-day moving average over the coming trading sessions because a close beyond the 200-day moving average at $36.47 would be known as a golden crossover and mark the beginning of a long-term uptrend. Stop-loss orders will likely be placed below $36.37 in case of a sudden shift in the fundamentals.
Lam Research Corporation (LRCX)
The most important catalyst for innovation when it comes to changes in technology such as the proliferation of mobile devices, interconnectedness of everyday devices, and augmented and virtual reality is undoubtedly coming from the semiconductor sector. One of the top holdings of the XT ETF from within the semiconductor sector that could be worth a closer look is Lam Research Corporation (LRCX).
Taking a look at the chart, you'll notice that the price has recently risen above the 200-day moving average and has managed to remain above on an attempted pullback. The bounce off of the influential level of support was enough to trigger a bullish crossover between the 50-day and 200-day moving averages (shown by the blue circle), which suggests that the long-term move higher is just getting started. Stops will likely be placed below $159.70 in case of a sudden shift in sentiment or fundamentals.
Marvell Technology Group, Ltd. (MRVL)
Another semiconductor stock that is a top holding of the XT ETF and is gaining the attention of active traders is Marvell Technology Group, Ltd. (MRVL). The pattern on the chart looks similar to those shown above, but it has lagged slightly, so the long-term moving averages have yet to cross. Active traders will likely look to the price action over the past couple of trading sessions as a leading indicator and attempt to buy as close to the support levels as possible. Stop-loss orders will likely be placed below $18.77, and a golden crossover in the coming days could be the catalyst that traders need to send the price significantly higher from here.
The Bottom Line
Exponential technologies are a market segment that many retail investors have never formally heard of. While it is easy to understand the need for exposure to new areas of technology, funds such as XT could be the ideal place to start doing research or buying in the event that traders would rather have fund managers make investment selections. One group that appears to be worth an even closer look could be semiconductors due to the lucrative risk-to-reward setups shown on the charts of Lam Research and Marvell Technology.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.