In addition to the new all-time high, the ETF completed a breakout from a 10-month bullish pattern, indicating a potential price target near $102.
In recent days, the tech sector has shown signs of significant recovery, reaching new all-time highs after a period of strong volatility. This signal is particularly important, considering the impact that technology has had on the stock market in recent months.
After a prolonged decline, the sector has broken important technical resistance, suggesting potential for further upside. This development could play a crucial role in supporting the market during the coming months, especially as the earnings season approaches.
In the current market environment, the iShares Expanded Tech-Software Sector ETF (IGV) has been a significant surprise. On Tuesday, it was the only one of the 175 major ETFs tracked to reach a new all-time high. This event is not just a statistical curiosity but reflects important dynamics in the technology sector and the stock market in general.
Technology has had a particularly turbulent 2023, with the sector suffering heavy losses between August and September. The decline in technology stocks has contributed significantly to the declines in the S&P 500, underscoring the importance of the sector in the global economy. However, IGV has reversed its trend, confirming that the sector is starting to recover.
The new high in IGV not only signals a rally but also has implications for the broader market. Historically, the last two months of the year are usually favorable for stock markets, and a strong recovery in the technology sector could support this positive trend.
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The fact that IGV has reached a new all-time high is particularly notable considering how long it has taken to get to this point. The last all-time high was in November 2021, when the ETF reached an intraday high of $89.76. Since then, IGV has undergone a drastic correction, losing up to 47% of its value by November 2022.
Meanwhile, another technology ETF, XLK (SPDR Technology ETF), has seen a much faster recovery. XLK had bottomed out around the same time as IGV, but reached new all-time highs as early as July 2023, signaling a faster and more robust recovery. Since its last all-time high, IGV has only risen 4%, versus a 37% increase for XLK. However, over a 24-month horizon, both ETFs have seen substantial gains: IGV is up 97% from its 2022 low, while XLK is up 103%.
While a nearly 100% increase may not seem inviting for new investments, what makes IGV interesting is its chart configuration. In addition to the new all-time high, the ETF completed a breakout from a 10-month bullish pattern, indicating a potential price target near $102. While IGV has struggled compared to other tech ETFs over the past 18 months, it has shown it can benefit from long-term bullish patterns.
Another positive signal comes from the oscillation of the 14-week RSI (Relative Strength Index) indicator, which has continued to move between the overbought zone (70 and above) and the average of 50. This indicates that the momentum is confirming the upward trend, a dynamic similar to that observed between 2020 and 2021. If this trend were to change, it could be a signal of reversal, as happened at the end of 2021.
Looking at the big picture, the new all-time high of the IGV marks the breakout of a multi-year technical pattern of "cup and handle", that is, a graphic figure characterized by a cup-shaped movement followed by a consolidation phase that creates the handle. The lateral movement observed in 2024 has effectively completed the "handle" part of the formation, now leading to a significant breakout.
Two elements stand out when observing the main breakouts of the IGV from 2010 to today. First, each pattern breakout has led to an immediate and sustained continuation of the upside. Second, the current formation is the largest ever seen, which could indicate further upside potential. While there are no guarantees for the future, the simultaneous breakout of two technical patterns and the breakout of a major resistance zone is a clear bullish signal.
The iShares Expanded Tech-Software Sector ETF (IGV) has shown positive signs with its recent all-time high, suggesting a solid recovery for the tech sector. Maintaining this breakout will be crucial, especially as earnings season approaches. If momentum and technical signals continue to support the upside, IGV could offer further upside opportunities in the broader market.
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Original article published on Money.it Italy 2024-10-20 14:44:00. Original title: C’è un ETF ai massimi storici che dovresti avere in portafoglio
