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5 Hot Tech ETF Charts with Upside Potential

Sanghamitra Saha

No subdued retail earnings, no weaker-than-expected economic readings could come in the way of the Nasdaq’s ascent. The tech heavy index went on hitting all-time highs after crossing the major landmark of 6,000 for the first time in late April, mainly on the back of the tech rally (read: 5 Must-Watch ETFs as Nasdaq Hits 6,000).

Needless to say, this fact puts the tech sector in the bright spot. Notably, the tech fund Technology Select Sector SPDR Fund XLK (up 8.6%) offered almost four times return than the SPDR S&P 500 ETF Trust SPY (up 2.6%)and SPDR Dow Jones Industrial Average ETF Trust DIA (up 2.3%)in the last three-month timeframe (as of May 16, 2017).

Reasons Behind the Rally in Tech Stocks

Solid Earnings

Investors should note that the earnings picture of the technology sector has been reassuring lately. Expected earnings growth for the technology sector for Q1 of 2017 is 12.7% on 6.2% higher revenues, as per the Earnings Trends published on May 10. The earnings growth rate is the second highest among the other industries. Revenue growth expectation is also decent.

Global Cyber Attack

A global ransomware attack "WannaCry," which locked down over 200,000 computers, gave another round of boost to the tech rally. The incident specially benefited cyber security ETFs like PureFunds ISE Cyber Security ETF HACK. We believe the very incident should also boost software ETFs like SPDR S&P Software & Services ETF XSW and PowerShares Dynamic Software Portfolio ETF PSJ (read: Cybersecurity ETFs Set to Rally After a Global Cyberattack).

Apple Topped $800 Billion Market Cap Mark

Technology giant Apple AAPL also emerged as the first U.S. company with a market cap of over $800 billion in early May, courtesy of upbeat tones by Warren Buffett and the highly optimistic report from analyst Brian White of investment firm Drexel Hamilton (read: What's Causing the Surge in Taiwan ETFs?).

Rising Semiconductor Demand

Among the whole of tech sector, semiconductors are riding high. For Q1 of 2017, the space is expected to score about 52.4% of earnings growth just behind the miscellaneous technology’s stellar growth rate of 87.1%, as per the Earnings Trends.

Growing Uncertainty Over Trump's Protectionist Policies

The Trump administration’s tone softened lately on several key protectionist issues on immigration and outsourcing – the two pillars that the tech sector stands on. Plus, with controversies doing rounds about the leakage of "highly classified information" to two top Russian officials by Trump, chances of his success in pushing through his pledges are ebbing now (read: Trump Trade Advisor's Comments Boost Mexico ETFs).

Hot Tech ETF Charts with More Room for Run

Below we highlight tech ETFs (and the corresponding charts) that were at all-time highs on May 16, 2017. These funds may see more run ahead. We focused on the fund’s weighted alpha (positive weighted alpha leads investors to those companies whose strong momentum is building) and volatility levels and compared the metrics with SPY and XLK.

Notably, the weighted alpha and volatility of SPY are +16.80 and 3.51%, respectively, while the same for XLK are +32.40 and 3.68%.

Global-X Social Media ETF SOCL

Weighted Alpha +54.70; Volatility (14d) 14.07%

iShares PHLX Semiconductor ETF SOXX

Weighted Alpha +60.70; Volatility (14d) – 15.78%

PowerShares NASDAQ Internet Portfolio PNQI

Weighted Alpha +41.20; Volatility (14d) – 7.12%

First Trust NASDAQ-100-Technology Sector Index Fund QTEC

Weighted Alpha +52.60; Volatility (14d) – 7.39%

iShares S&P Global Technology IXN

Weighted Alpha +40.10; Volatility (14d) – 3.55%

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Apple Inc. (AAPL): Free Stock Analysis Report
SPDR-TECH SELS (XLK): ETF Research Reports
SPDR-DJ IND AVG (DIA): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
ISHARS-PHLX SEM (SOXX): ETF Research Reports
PURFDS-ISE CYBR (HACK): ETF Research Reports
PWRSH-ND INTRNT (PNQI): ETF Research Reports
SPDR-SP SOF&SER (XSW): ETF Research Reports
GLBL-X SOCL MDA (SOCL): ETF Research Reports
FIRST N-100 TEC (QTEC): ETF Research Reports
ISHARS-GLB TECH (IXN): ETF Research Reports
PWRSH-DYN SFTWR (PSJ): ETF Research Reports
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