One area of the market showing a lot of promise is the technology sector. Business may be suffering for these companies, but the shares have been rallying since the beginning of March.
Take a look at the S&P 500 Tech Sector Index below (blue line). It has climbed over 12% since the beginning of the year, while the S&P 500 has risen by a miniscule 0.4% over the same period. The most important observation here is that the sector has recently broken above its 200-day moving average (red line). This could very well signal an end to the long-term downtrend for the sector...
Breakthrough - the tech sector peaks through its 200-day moving average 
Technical traders swear by the 200-day moving average. It’s the ultimate stress test. If a sector breaks above this level, it’s a ‘go’ signal to investors previously on the sidelines to buy. It demonstrates that the rally has legs - and this is exactly what the tech sector has just achieved.
Does this mean consumer demand for technology - a notoriously cyclical sector - is coming back? Quite possibly. Especially if you look at the latest personal consumption report in the US. It may not be largely focused on the tech sector, but it shows the largest surge in two years. This looks encouraging...
So, there has been a return to growth in the durable goods sector. If the charts are to be believed, technology stocks are currently a good bet. And they could just stay at the front of the pack.
Editor’s note: Tom Bulford has recommended specific ways to profit from the technology trend. You can be one of the first readers to get in on his next red hot penny share play. Get access to his entire small-cap portfolio right now...
Your capital is at risk when you invest in shares - you can lose some or all of your money, so never risk more than you can afford to lose. Always seek personal advice if you are unsure about the suitability of any investment.
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