Innovative technologies are reshaping the way that we as humans live and work. Companies that specialize in the types of products that are changing the global economy are the focus of long-term investors and active traders alike. As you'll see in the charts below, now could be an ideal time to increase exposure to this in-demand market segment.
SPDR Kensho New Economies Composite ETF (KOMP)
Investors who are most interested in adding exposure to innovative companies are often prudent to examine the top holdings of exchange-traded products such as the SPDR Kensho New Economies Composite ETF (KOMP). For those unaware, the fund's managers seek to utilize artificial intelligence and quantitative weighting to track an index of companies that leverage exponential processing power, robotics, AI, and automation.
As you can see below, the price of the fund has recently surpassed the combined resistance of the 200-day moving average and influential trendlines. These levels will most likely be used by followers of technical analysis as guides for placing buy and stop orders. More specifically, at current levels, the momentum is in clear control of the bulls, and most traders will likely protect against a sudden shift in sentiment by placing stop-loss orders below $33.79.
iRhythm Technologies, Inc. (IRTC)
One method for finding innovative companies that could be leveraged by traders is to explore the top holdings of ETFs such as KOMP. For example, taking a look at the chart of iRhythm Technologies, Inc. (IRTC), you can see that the price of the stock has been trading within a period of consolidation over most of the past 12 months.
However, as of 2020, you can see that the price has started to make a move higher. The upward shift of the moving averages, which was initiated by a bullish crossover in January, is a sign to many traders that a long-term uptrend is in the early stages. From a risk management perspective, stop-loss orders will most likely be placed below $109.91 or $84.08, depending on risk tolerance and investment horizon.
Masimo Corporation (MASI)
For followers of technical analysis, another innovative medical device company and top holding of the KOMP ETF that could be worth a closer look is Masimo Corporation (MASI). As you can see from the chart, the bulls have been in clear control of the momentum since last summer.
Active traders will likely want to note how the selloff in March sent the price toward the long-term support of the 200-day moving average and how it was quickly met by increased buying pressure. The impressive bounce from the long-term support levels was enough confirmation for the bulls to reaffirm the strength of the underlying uptrend. Based on this pattern, bullish traders will most likely look to add to their positions on any short-term retracements such as the recent move toward the support of the 50-day moving average.
The Bottom Line
Innovative companies are reshaping the world that we live in, as shown by the strong performance of funds such as the SPDR Kensho New Economies Composite ETF. It is interesting to note how medical device companies have recently started to move their way into the top holdings, and as shown on the charts discussed above, it appears as though we could be in the early stages of a major move higher.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.