While co-hosting the WealthWise Women show with me yesterday, Mary Ellen McGonagle said something that got my attention and filled me with intrigue. To summarize, she said that she was finding that the Technology sector is becoming more of a defensive one in the face of the coronavirus. That is an interesting proposition, since the Technology sector has always been considered the "jewel" of the aggressive sectors. As I studied the tables and thought about this more, I had to agree with her. Check out the Sector Summary for the past three months. Technology is right up there with the top three defensive sectors of Health Care, Utilities and Consumer Staples (despite negative returns, those four sectors held up the best overall).
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If you drill down into the Technology sector, you will see that not all have been profitable, but Software has:
Let's take it one step further and look at the top SCTR-ranked stocks within Software over past three months. There are a small-, mid- and large-cap at the top:
Shopify (SHOP) is a mid-cap stock that is up nearly 30% over the past three months. Consider that. That gain occurred when the overall market fell about 14%. That's a 44% delta. (As an aside, Mary Ellen added this stock in her model portfolio a while back; it went up 75% since then). The question is whether it's too late to get in. After today's action, I have to say I'd want to see a pullback next week, but it has been a runner and runners like to run. The indicators suggest it will run higher and overcome resistance at its all-time high. The double-bottom formation that easily executed has a minimum upside target of about $625. Volume continues to rise on this rally. The PMO is overbought, but not in the extreme. The RSI is overbought, but also not to an extreme. Notice that the RSI can stay overbought for some time in a strong bull market phase for SHOP. For my Diamonds Report readers, I usually annotate a percentage stop-loss zone. There was a Silver Cross (20/50-EMA positive crossover) yesterday, which triggered an IT Trend Model BUY signal.
Next up is NantHealth (NH). This is a thinly-traded, low-priced small-cap stock. It isn't my cup of tea on face value for those reasons. However, it is the top SCTR-ranked small-cap in the software industry group, so I'm covering it. The PMO has a BUY signal and is not overbought. The RSI is rising and also is not overbought. Support at $1.80 is a little over 10% away. Should price meet the next area of overhead resistance, it would produce a gain of over 20%.
As investors, we want to accomplish two basic things: (1) Determine the trend and condition of the market and (2) select stocks that will ride that tide. The DecisionPoint Alert helps with the first step, and DecisionPoint Diamonds helps with the second. Go to DecisionPoint.com and SUBSCRIBE TODAY!
Citrix Systems (CTXS) was in the Diamonds Report for 3/10. It's currently up over 31% since then. The PMO is extremely overbought. The RSI is mildly overbought, but is rising. Short-term support is 9.5% away. The chart is still very favorable. I honestly like that it was down slightly and we saw a declining top. This one may pull back and make it more desirable than it already is.
CONCLUSION: There are areas of Technology that are now shifting to "defensive" rather than "aggressive", given the new work-from-home revolution that has been forced on many due to the virus. Whether these industry groups remain "defensive" when the virus subsides, only time will tell.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting! - Erin
Email: erin@decisionpoint.com
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