It has been three years since we've seen a move like this...
The Melt Up in U.S. stocks is well underway. And the tech darlings of the original 1990s Melt Up are showing their stuff once again.
You see, a trend in one large U.S. tech fund is accelerating. This batch of stocks recently rallied nine days in a row.
Importantly, these kinds of hot streaks often signal that the trend is strengthening. That means more gains ahead in this hot sector.
Specifically, we could see major outperformance – and easily double-digit gains – over the next year.
Let me explain...
You might not want to believe it. But trends are a powerful investing tool... maybe the most powerful.
That frustrates some folks because it's so simple. Simple things shouldn't work so well in the markets. But they often do.
The facts are that a rising stock tends to keep rising in the short term. And following the trend is one of the easiest ways to make money in the markets.
You can see this even more when an uptrend starts to accelerate. That's exactly what we are seeing right now in the iShares U.S. Technology Fund (IYW).
The fund recently rallied for nine consecutive days. Take a look...
Clearly, the overall trend is moving higher. That's no surprise with the overall market hitting new all-time highs. And in the case of tech stocks, the trend is accelerating.
The recent string of up days is the longest we've seen since 2017. To get an idea of how powerful these signals can be, we looked at similar cases going back to 2000.
This kind of situation has led to solid outperformance over the past two decades. It typically leads to double-digit gains over the next year. Check it out...
Since 2000, tech stocks have returned less than 6% a year. That's a mediocre return compared with what's possible after today's setup...
Similar cases have led to near-6% gains in three months, 8% gains in six months, and a solid 12% gain over the next year. That's double the gain of a classic buy-and-hold strategy.
The Melt Up is in full force. And given that, I expect we could see much bigger gains this time around.
Remember, tech stocks were the big winner of the last Melt Up. They've been soaring this time around too. And the hot streak we recently saw in tech stocks is a sign that there is plenty of life left in today's market.
You want to own stocks today. And you really want to own tech stocks. Shares of IYW are an easy way to do it.
Good investing,
Chris Igou
Further Reading
"We just experienced one of the single-greatest monthly rallies in the stock market's history," Dr. David Eifrig writes. Amid the pandemic, that may come as a shock. But with more people working from home, this sector of the market is poised to lead the way higher... Read more here: The 'New Normal' of Working Life Bodes Well for These Stocks.
"The technology sector has led the way up since the March market low," Greg Diamond says. And it's still reaching all-time highs. But this sub-sector is flashing signals that say it will lead to even bigger gains... Get the full story here: This Sector Is Signaling the Tech Rally Isn't Over Yet.
Shenzhen is the new Silicon Valley. And it's still growing like crazy. Plus, we can profit from a one-click way to own this new tech hub right now...
'LESS BAD' NEWS SENDS THIS BEATEN-DOWN AUTOMAKER UP TRIPLE DIGITS
Today, we're taking a look at one of our favorite investing themes...
As regular readers know, investing in stocks that have gone from "bad to less bad" can make for impressive gains. After a company's shares have plummeted, even the slightest bit of good news can mean a huge rally is coming. And that's what we're seeing with today's company...
Fiat Chrysler Automobiles (FCAU) is one of the world's largest automakers. The company sold off in recent years as rising costs and regulatory fines cut sharply into profits... and it plummeted further when COVID-19 struck. But now, production is back near pre-pandemic levels and folks are snapping up the company's expensive Jeep SUVs and Ram pickups. And in its most recent quarter, Fiat Chrysler made a $1.4 billion profit – compared with a $200 million loss this time last year.
As you can see, shares have climbed about 175% since their March lows... but are still below their 2018 highs. That shows how much you can gain when things just get "less bad"...
