Technology sector stocks record new highs, gives the market a positive momentum

By: Ruchi Gupta
Ruchi Gupta
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on Jul 27, 2021
  • Ahead of the mega-cap companies declaring earnings, the market is experiencing a good momentum.
  • Stocks in the technology sector are performing well, touching new highs.
  • Also touching a new high is the XLK technology ETF, which keeps track of stocks in the S&P 500 sector.

The tech sector cooled off on Tuesday but is still not far removed from their all-time highs which were recorded on Monday. Leading the charge in tech stocks is a combination of the mega-cap trillion dollar giant names along with some under the radar stocks, Ari Wald, head of technical analysis at Oppenheimer said on CNBC’s “Trading Nation.

Stocks in the tech space give the market a good momentum

Ahead of mega-cap companies declaring their earnings, the market is experiencing good momentum, thanks to the performance of stocks in the technology space. The technology sector started on a positive note this as the market opened on Monday, and this momentum continued so much so that the tech space touched new highs, thus, setting new records.

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S&P 500 sector stocks in the XLK technology ETF (NYSE: XLK) also touched new highs as the market closed on Monday. Stocks like Intel Corporation (NASDAQ: INTC), HP Inc (NYSE: HPQ), and Seagate Technology Holdings PLC (NASDAQ: STX), among others, gave the market the momentum it is experiencing. Wald noted:

From a bottom-up viewpoint, it goes beyond a few megacap stocks. We think it’s broader than that. In terms of more top-down macro perspectives, we like the sector because it provides pro-cyclical exposure. We think we’re still midcycle bull market and it’s a sector that doesn’t require rising interest rates and rising commodity prices as do other reflationary cyclical sectors.

There is more good news from the markets

The Invesco S&P 500 Equal Weight Technology ETF (NYSE: RYT) has gone up more than 4% in the last week. According to Wald, semiconductors is one of the sectors that goes on to highlight the market’s broad strength. Commenting on this, he said:

“What is technically attractive for us here is that the [XSD equal weight semi ETF] been really basing for much of the year, it’s been in a range, it’s been building a base above its 200-day moving average, and for that reason, we think a breakout above $190 resistance is more likely than a breakdown below $170 support, given the uptrend going into this consolidation,”

XSD ETF closed low on Monday but up 4% in the past week

SPDR S&P Semiconductor ETF (XSD) closed below the $183 mark on Monday. However, it is up 4% in the past week. According to John Petrides, portfolio manager at Tocqueville Asset Management, cybersecurity and fintech are the safest bet. Petrides said:

“Covid has moved all of our lives more digitally, so the need for more security is only going to continue. More dollars are to go into that, and in theory, whatever humans can make, humans can break. So you could see trends in cybersecurity going on in perpetuity.”

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