If you don't own tech stocks, you're missing out on a massive rally right now.
2017 has been a strong year for the technology sector. Since the calendar flipped to January, the Technology Select Sector SPDR ETF (XLK) has climbed more than 9% higher, besting the S&P 500's run to new highs by half again. But there's a bigger rally in tech taking place if you look closer at the stocks within the Technology Select Sector Index.
That's because, of the 72 stocks that make up that popular tech index, about a third are up 15% or more already this year. Put simply, a material chunk of the tech sector is on track for a triple-digit rally if this pace continues for the rest of the calendar year.
That doesn't mean that you should just go blindly buying technology companies right now, though -- the tech sector's laggards are definitely names you don't want to own in March.
So, to figure out which specific tech trades look buyable, we're turning to the charts for a technical look at three huge tech stocks that are triggering buy signals this month -- and one you should sell before it plummets.
For the unfamiliar, 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.
Without further ado, let's take a look at four technical setups worth trading now.
Topping our list of big-cap breakouts from the tech sector is one of the biggest of them all: Microsoft (MSFT) . Microsoft has been a strong performer in the last nine months or so, rallying more than 33% on a price basis since last summer. But don't worry if you've missed out on that upside move in MSFT; a classic technical setup is pointing towards a second leg higher in March.
Microsoft has spent the last couple of months forming an ascending triangle pattern, a bullish continuation pattern that indicates higher levels ahead. Microsoft's ascending triangle is formed by horizontal resistance up above shares at $65, with uptrending support to the downside. Basically, as this stock pinballs in between those two technically-significant price levels, shares have been getting squeezed closer and closer to a breakout through that $65 price ceiling. When that happens, we've got a buy signal.
The 50-day moving average has been acting like a decent proxy for support since last fall. For that reason, once Microsoft breaks through the $65 level, it makes sense to park a protective stop on the other side of the 50-day.