Nvidia, Apple and Microsoft have market caps north of $3 trillion, so when we hear about large cap technology, we naturally think of those. But investors focusing on those big three may be missing some compelling breakouts in the sector, according to the charts. Since the market low in April, Nvidia is up nearly 80% and Apple almost 30%. Microsoft is up a pedestrian 10% since then, but combined, they’ve helped propel the SPDR Technology ETF (XLK) to a new all-time high. Through Tuesday, the ETF was up eight straight days. However, the XLK has a lot more than three stocks. Overall, the ETF has 65 components, but the other 62 don’t get a lot of attention. But ignoring what’s going on under the surface of any index or ETF could make us miss compelling chart patterns. Indeed, there’s nothing wrong with riding a trend, but many times a long uptrend starts with a pattern breakout. When a stock breaks out, it means that demand has overpowered a previously strong supply zone (resistance). Oftentimes, that leads to a shift in momentum that can stick around for longer than we think. Here are three S & P 500 Technology Sector components that are sporting constructive chart patterns now: Roper Technologies (ROP) is a software company, which has been flirting with new all-time highs this week. However, the stock is net flat since first puncturing the $560-level in late January. As the chart shows, ROP has tried and failed to punch through this zone numerous times since then. This now is the fourth time ROP has endured multiple months of consolidation after making a new high. Three prior times, it eventually broke out. Could breakout number four be imminent? Well, over the last few weeks, the stock has broken out through a smaller, multi-week bullish inverse head & shoulders pattern (green). And should ROP continue to hold above that breakout zone, it would have an upside objective a good deal higher than its last high point – near $590. TE Connectivity (TEL) has been scratching and clawing its way higher since hitting a low in October 2022. Last fall, it broke out from an inverse head and shoulders pattern (target $153), which it nearly hit this week. In April, it pierced another key resistance line and triggered the pictured cup and handle pattern in blue. That objective is much higher at $175. While it may take the stock some time to acquire that target, the best thing TEL has done over the last year and a half is make higher highs on each reflexive up-move. Continuing to do that would put its former highs in the crosshairs. Here’s a weekly chart of Microchip Technology (MCHP) , a semiconductor stock. Since bottoming in the summer of 2022, it’s gone through a series of rallies and retracements. Ultimately, though, the extensions have been stronger than the pullbacks. And starting in 2023, the following combination has produced the best results: rallying from a higher low as the stock’s 14-day Relative Strength Index bottoms near 50. It’s never perfect, but this setup has presented favorable risk-reward scenarios more often than not, and each ensuing bounce eventually resulted in higher highs. The stock just pulled back 11% from its most recent high, which has pulled its 14-week RSI back to the low 50s. Thus, on the next price flip higher, MCHP would have a chance to replicate its past behavior and bounce once again. Should this happen soon, the target would be its former highs near 100. -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
