It is hard to go a day without noticing the advancements in technology and the fundamental shift in technological infrastructure to the cloud, the adoption of new payment methods, the reliance on big data, the new normal of having an interconnected world that is known as the Internet of Things and the dominance of social distribution. In the paragraphs below, we'll take a look at some charts suggesting that the underlying uptrend is only growing in its conviction and that now could be the time to buy.
ARK Web x.0 ETF (ARKW)
Investors looking to capture the growth of the new generation of technology companies ought to look no further than the ARK Web x.0 ETF (ARKW). Fundamentally, this fund typically comprises 35 to 50 holdings in companies that may develop, produce or enable cloud computing, cybersecurity, e-commerce, big data, artificial intelligence, mobile tech, Internet of Things, social platforms and blockchain.
As you can see from the chart below, the ETF's price has recently broken beyond the resistance of what was close to being a head and shoulders pattern. The ill-formed right shoulder will not likely bother the bulls because the momentum carried the price beyond the resistance of the 200-day moving average and the level that would have acted as the neckline ($48.32). The breakout and subsequent retest of the 200-day moving average shows that the bulls are in control of the momentum and that target prices will now likely be set near $58, which is equal to the entry price plus the height of the pattern.
Square, Inc. (SQ)
The revolutionizing of the payment models that are widely accepted by merchants are generally left to the giants such as Mastercard Incorporated (MA) and Visa Inc. (V). However, in recent years, Square, Inc. (SQ) has burst onto the scene and is changing the game. With a market capitalization of $31.7 billion, there is still a lot of upside before Square even comes near the scale of the aforementioned behemoths.
Taking a look at the chart, you can see that the price recently moved above the resistance of its 200-day moving average and has found support at $70 on each attempted pullback. The price action within the defined range is interesting for followers of technical analysis because a break beyond one of the levels will be used as confirmation of a surge in momentum in the direction of the break. Using the chart of ARKW as a leading indicator and the behavior near the 200-day moving average, technical traders may want to hold an upside bias and enter a position early in anticipation of a move higher. Stop-loss orders will likely be placed below $70 in case of a sudden shift in sentiment or failed move above the dotted resistance level.
Adobe Inc. (ADBE)
Adobe Inc. (ADBE) is regarded as the market leader in the segment known as software as a service (SaaS). The suite of programs available from Adobe is not currently matched by any of its competitors, and as a result, the company has one of the best subscription businesses in the world. Fueling the majority of the creative industry, the programs act as the livelihood for thousands of people.
As you can see from the chart, the business model has handsomely rewarded investors over the past few years. The weekly chart shows one of the strongest uptrends anywhere in the public markets, and active traders will likely look to add to their positions if the price pulls back anywhere in the vicinity of $220.
The Bottom Line
It can seem nearly impossible to keep up with the advancements in technology. For investors, one of the best ways to profit from the macro trend is to look at niche exchange-traded products such as the ARK Web x.0 ETF and its top holdings. As shown above, shares of cutting-edge tech companies are trading within some of the strongest uptrends in the market, and given the proximity to nearby support, now could be the ideal time to buy.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.