[Chart of the Week] Is Technology Making A Run Towards All-time Highs?

JC Parets
January 27, 2017

While so many people seem to be focused on the major US Indexes like the S&P500 or the Dow Jones Industrial Average reaching the irrelevant 20,000 level, I prefer to focus on individual stocks and sectors. There are areas of strength, like Technology obviously, and areas of weakness like Healthcare and Consumer Staples. Stocks are like investors, there are winners and losers. I prefer to be a winning investor focused on winning stocks, wouldn't you? Today we're taking a look at Technology as it quietly breaks out again to new highs.

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[hide_from visible_to="member"]First, here is the Technology ETF $XLK breaking out last July above the key $44.75 area that represented overhead supply over the prior year. The trade has been to be long Tech if we are above that level and we continue to grind higher. The answer to the question, "How high can it go?" seems to be back to the all-time highs in March of 2000: $65. Why not?

XLK

Momentum is in a bullish range and prices are above key resistance. We want to continue to be a buyer of any weakness in Technology.

We want to look at Semiconductors as a leading indicator for Tech as a group. Here is the PHLX Semiconductor Index breaking out to new 16-year highs this week. If Tech as a group is going to to retest those all-time highs from March of 2000, I would expect Semi's to do the same. This is going to continue to be our tell. If we're above 908 in the Semiconductor Index, we want to continue to err on the long side of chip stocks:

SOX

I think we're heading back up towards 1366 in this index. The line in the sand is very clear.

Finally, here is one of my favorite charts in the space. This is Technology relative to the S&P500 breaking out of a decade and a half long base. "The bigger the base, the higher in space", is how I learned it:

XLK-SPY

If all of the stars are aligning: Tech breaking out, Semi's breaking out and Tech breaking out on a relative basis, it's hard for me to argue against a final leg higher in this space to retest the all-time highs from March of 2000.

When you talk about the individual components in the Tech sector, it's not like they're breaking down. To the contrary, Apple $AAPL is going out at new 52-week closing highs, Microsoft $MSFT is at new all-time highs, Google $GOOG is at new all-time highs, Facebook $FB is flirting with new all-time highs and Cisco $CSCO and Intel $INTC are coming out of decade plus long bases.

The largest components are suggesting that these are all in uptrends and the indexes that track them are confirming both the absolute and relative strength in Tech. Until something changes, I'm not going to fight this trend.

This week I will be sending Allstarcharts Premium Members a list of stocks to profit from these trends. If you are not a member, you can start your risk FREE trial here today: Allstarcharts Risk Free Trial

 

 

Tags: $XLK $SOX $SMH $AAPL $FB $GOOG $INTC $CSCO

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