No doubt about it, the tech sector has been the best corner of the market to own in 2017.
Case in point: The popular Technology Select Sector SPDR ETF (XLK) , an exchange-traded fund that tracks the sector as a whole, is up more than 17% on a total returns basis year-to-date. In other words, tech stocks are leaving the rest of the S&P 500 in their dust this year. And the good news for investors is that that sector-wide momentum isn't showing any signs of slowing as we head into the typically quiet summer months.
All year long, big stocks have been leading the tech sector higher. And, sure enough, that's not changing either.
In fact, some of Wall Street's biggest tech stocks are on the verge of breakout moves right now -- Wednesday. So we'll take a technical look at three huge technology names that are getting ready to charge higher (and when you should buy them).
In case you're unfamiliar with technical analysis, here's the executive summary: Technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
Meanwhile, Jim Cramer talks about oversold retail stocks on Real Money. Get his insights or analysis with a free trial subscription to Real Money.
So, without further ado, here's a rundown of three technical setups that are showing solid trading potential right now.
If bigger is better in the tech sector right now, it shouldn't come as any surprise that $797 billion technology behemoth Apple Inc. (AAPL) is leading the charge. Apple is up 32% on a total returns basis so far in 2017, contributing a meaningful chunk of the overall market's upside because of its sheer size. But don't worry if you've missed out on Apple's record-breaking rally, its chart is signaling a second leg higher from here.
The price pattern in Apple here is an ascending triangle setup, a bullish continuation pattern that signals more upside ahead. The pattern is formed by a horizontal resistance level above shares -- at $155 in Apple's case -- and uptrending support to the downside. Basically, as Apple has bounced in between those two technically important price levels, shares have been getting squeezed closer and closer to a meaningful breakout through $155. When that happens, we've got a buy signal.
Shares have flirted with prices just above $155 in recent weeks -- like their all-time high at $156.65 -- that's why it's key to wait for a meaningful push through that line in the sand before you jump into this trade.
International Business Machines
Even though the tech sector is leading in 2017, $143 billion tech stock International Business Machines (IBM) has been a notable laggard lately. Since peaking back at the end of February, this stock has shed more than 16% of its market value, trailing the rest of the market by a big margin. But shareholders could be in for a break; IBM is carving out a bottom this summer.
The pattern playing out now in IBM is a rounding bottom, a bullish reversal setup that looks just like it sounds. The price pattern signals a gradual shift in control of shares from sellers to buyers, and it triggers when shares are able to muster the momentum to push through the price ceiling that defines the top of the pattern. In IBM's case, that's the $153.75 level.
The $153.75 resistance level is a price where there is an excess of supply of shares; in other words, it's a spot where sellers have been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $153.75 so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. Keep a close eye on IBM's trading this week.
Micron Technology Inc.
You don't need to be an expert trader to figure out what's happening in shares of $35 billion computer memory maker Micron Technology Inc. (MU) . Instead, deciphering this chart is about as simple as it gets.
Micron has been bouncing its way higher in a well-defined uptrend for about a year now, rallying 140% over the course of that 12-month stretch. And, as surprising as more upside might seem for Micron, at this point, it's still a "buy the dips stock."
In other words, the uptrend that's corralled Micron's price action is still intact. The latest buyable dip in MU came just last week when shares successfully tested the bottom of the uptrend and bounced higher. That makes Micron a stock worth buying here.
If you decide to jump into the Micron trade this week, the 50-day moving average is a logical plcae to park a protective stop.
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At the time of publication, author was long Apple.