Internet Stocks Lead The Market Higher

Long time readers know that I like to look at a lot of different markets, asset classes and sectors. Spending hours and hours every week searching far and wide for strength, weakness, key reversals, large bottoms, healthy consolidations, etc is something that I could never put a trade on without completing first. I would be doing our investors, and myself, a disservice by not positioning ourselves in ONLY the most favorable risk/reward opportunities.

Today I want to focus on this monster breakout in the Internet sector. More specifically, I am referring to the First Trust Dow Jones Internet ETF $FDN. After an explosive rally since the late 2011 lows, prices have consolidated these 100% returns in a very healthy pattern well-defined by converging trendlines. Here is a weekly candlestick chart showing, what I consider to be, an upside resolution to this digestion of huge gains:

Looking shorter-term, here is a daily candlestick chart showing prices, not only breaking out above the upper of the two converging trend lines since the all-time highs early last year, but also above overhead supply since September:

This is a name we only want to own above this breakout level. The key drivers of this ETF are, obviously, the "Internet" stocks like Amazon, Facebook, Ebay, Google, Priceline and Netflix who alone represent over 40% of this fund.

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Tags: $FDN $AMZN $FB $EBAY $GOOG $GOOGL $PCLN $NFLX