Market Updates

Can Technology Stocks Support The Market Higher Again?


Gary Christie


July 9, 2019

The S&P 500 has broken above key resistance to reach record highs this week which has signaled the end of a long term broadening wedge consolidation technical pattern that started over a year ago.

Looking at sector performance, technology has come back on top as a leader with the SPDR Technology select Sector Fund ETF (XLK) returning 13.8% over the last month. The utilities sector fund ETF (XLU) is positive on the month but remains the laggard with a 4% return. We like to see technology outperform defensive sectors like utilities in a bull market.

Diving into more data, the SPDR Technology select Sector Fund ETF (XLK) has closed higher than it opened in August 100% of the time over the last 5 years posting an average return of 2.1 per cent.

Using Recognia’s technical event screener, I searched for tech stocks that have a bullish classical technical pattern, 15% minimum upside potential and a positive analyst rating.

Texas Instruments (TXN:Nasdaq) just confirmed a Bullish symmetrical triangle pattern. Texas Instruments Inc is a Dallas-based company that generates about 95% of its revenue from semiconductors and the remainder from its well-known calculators. Texas Instruments is the world’s largest maker of analog chips, which are used to process real-world signals such as sound and power.

Texas Instruments TXN

The prices have broken upward out of a consolidation period, suggesting a continuation of the prior uptrend.

A Symmetrical Continuation Triangle (Bullish) shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.

The investment ideas presented here are for information only.  They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing. Learn more.

Gary Christie

Head of North American Research
Gary has over 15 years in financial markets. Prior to joining TC, he served as an equity & derivatives specialist with TD Bank and Bank of America. Gary is regularly quoted in Bloomberg News, conducts many education and market outlook webinars for investment institutions all over the world and has been a guest speaker at the New York Traders Expo.
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