You’ve heard it a million times … the secret to making money in real estate is “location, location, location.”
And there’s a stock-market corollary.
It’s “technology, technology, technology.”
Especially right now.
And not just in stocks
Tech-focused ETFs are pretty hot right now.
My Quantum-Edge trading system is telling me so.
Here in today’s issue of Power Trends, I’m going to share the Top Three ETFs that my system is spotlighting.
Then I’ll show you how this bit of “market intelligence” can help us cash in.
Ranking ETFs and Stocks
It’s a mantra for me: To find a stock that’s likely to go up, find one with great fundamentals and terrific technicals – that’s being accumulated by “Big Money” investment pros.
And it makes total sense that what works for individual stocks also works for exchange-traded funds (ETFs). After all, ETFs are just baskets of stocks.
And the baskets holding all the “best” stocks are likely to be the best ETFs.
Each and every trading day, my Quantum Edge system ranks more than 6,000 stocks based on those three crucial factors. It does the same for ETFs, using the same algorithms that work for stocks.
In fact, let me show you with a Quantum Edge breakdown on those three top ETFs.
Hot ETF No. 1: Technology Select Sector SPDR ETF (XLK)
This ETF is what its name says it is – an ETF focused on the tech sector.
XLK checks in with an overall Quantum Score of 74.3, which is in the 70-85 zone I target for possible new buys.
Its Fundamental Score, which rates the health of the businesses in the ETF, is a strong 68.6. Its Technical Score, which is more about price momentum, is an outstanding 78.4.
That hot Technical Score is due, in part, to the hot price action we’ve seen in this fund: It’s zoomed 27% so far this year, steadily marching towards new highs.
Not surprisingly, its Top 5 holdings are also among the top stocks this year: Microsoft (MSFT), Apple (AAPL), NVDA (NVDA), Broadcom (AVGO), and Salesforce (CRM). They have gained 52% on average in 2023.
Hot ETF No. 2: Tech Innovator IBD 50 ETF (FFTY)
Investor’s Business Daily says this ETF invests in companies that are “generating outstanding profit growth, big sales increases, wide profit margins and a high return on equity.”
Sounds a bit like a descriptor for my Quantum Edge system.
These are, in fact, similar to the “predictive” metrics my algorithm uses. (Although I doubt the fund’s methodology is anywhere near as thorough and data-driven as my system.)
FFTY posts a Quantum Score of 74.0, which is almost identical to XLK above. Its Fundamental Score is a little weaker, at 63.5. But its Technical Score is higher, at 81.4. The price move hasn’t been that dramatic – it’s up nearly 8% this year – so the overall score is nudged higher by other analytic factors in my system.
The fund’s Top 5 holdings are a more diverse set of companies – Rambus (RMBS), Duolingo (DUOL), DraftKings (DKNG), Inspire Medical Systems (INSP), and Axcelis Technologies (ACLS). The companies in this ETF range from semiconductors to medical devices, and from educational software to online sports betting. Like the rest of their tech-sector brethren, these are stocks that have rallied here in May.
Pro Tip: If you’re considering FFTY as an investment, you’ll see that it trades on low volume. That’s less important with an ETF than with a stock, since an ETF’s price is more tied to the stocks it holds.
Hot ETF No. 3: First Trust Expanded Technology ETF (XPND)
XPND invests heavily in information-tech (I.T.) companies — and in finance and communications service firms that capitalize on tech. These are the “expanded technology companies” that give the fund its name.
XPND currently rates a Quantum Score of 73.8, just a smidge below the two predecessors above. Its Fundamental Score is the highest of the three, at 70.2, and is Technical Score is the lowest of the three, at a still outstanding 76.4. It is up 18% so far this year.
The ETF’s Top 5 holdings are household names: Meta Platforms (META), Nvidia (NVDA), Alphabet (GOOGL), Microsoft (MSFT), and Mastercard (MA). MSFT is the only overlapping stock among the three ETFs, held in XPND and XLK.
The Best Way to Profit…
There you have it. That profitable theme.
Technology. Technology. Technology.
It’s the growth sector of all growth sectors.
Does that surprise you? After all, just one year ago it seemed like investors hated all things tech. But tech stocks have rallied here in 2023. And many of those stocks still have plenty of room to run before they get back to previous highs.
With all the worry about interest rates, inflation, and a possible recession, you might believe that investors see “growth” as being synonymous with “risk.”
But here we are: Tech-related investments are leading the way.
This tells us that Big Money – the money that accounts for 70%-90% of daily trading volume and actually moves stocks – isn’t “investing scared.” It’s not hunkering down. It’s hunting for profits.
And now we know where a big chunk of that money is going.
We’ve seen that my system ranks stocks. And we’ve seen that it ranks ETFs.
It also ranks sectors. And Technology is the leader over the last two weeks. We can see the number of Big Money “buy” signals (green bars) have picked up recently, while the “sell” signals (red bars) have fizzled out.
Keep in mind that these are all signals of unusual (above the norm or extreme) buying and selling, not regular volume charts. Those huge green bars early in the year show massive buying. There was some selling in March and April, and now buy signals are beginning to again dominate here in May.
Tech ETFs are one way to profit from strength in the sector, but I prefer a more selective approach – as in select the best.
ETFs have a lot of stocks in them, and by definition you invest in all of them – the leaders and the laggards. You would do better if you invest in the leaders, right?
That’s where our Quantum Edge system gives us a big advantage. By evaluating the most predictive factors in more than 6,000 stocks every day, it helps us zoom in on those with the highest probability of making you good money in the coming weeks and months.
These are the stocks with the strongest fundamentals and technicals that Big Money is also buying… the most elite opportunities in the market.
Seven of the Top 10 stocks in my system this morning were tech stocks. One is Advanced Micro Devices (AMD), a semiconductor company whose shares are up nearly 15% in less than two months since I recommended the stock my Quantum Edge Trader service. It has surged past our initial buy limit, and we are now holding for more gains.
The strongest stocks in the strongest sector are often among your best opportunities. Common sense tells us that. And data confirms that.
Those pockets of strength exist even in choppy markets, and right now, tech is one of the top places to be looking.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
P.S. Big Money players try to hide their moves, cover their tracks, and keep their actions secret, but our Quantum Edge system spots where much of that Big Money is going – in the market, in sectors, and in stocks.
I spent a big chunk of my career as the “market maker” on Big Money trades, so I learned the telltale signs of money flows.
When we detect Big Money flowing into stocks that are strong fundamentally and technically, we have the stocks that give us that 70% win rate… and that can make money even in an up-and-down market.
Click here to learn more about my proprietary system and how to put it to work for you.
