Cybersecurity has been dominant theme in the financial markets as well as the media so far in 2020. As the fundamental need for quality solutions across hardware, software, and services continues to rise, investors will be well suited to follow the charts from across the sector. Recent breakouts combined with nearby support levels are providing traders with interesting risk-to-reward setups and are pointing to higher prices over the coming months.
PureFunds ISE Cyber Security ETF (HACK)
Active traders who are looking to gain exposure to the niche segment of cybersecurity companies may want to consider adding a niche fund such as the PureFunds ISE Cyber Security ETF (HACK). Fundamentally, the ETF comprises 56 holdings, and it carries an expense ratio of 0.60%.
As you can see from the chart below, the bulls took control of the momentum in early January by sending the price above an influential level of resistance marked by the dotted trendline. The rise in price over the past several months has also triggered a bullish crossover between the 50-day and 200-day moving averages, which is commonly used by followers of technical analysis to mark the beginning of a long-term uptrend. From a risk-management perspective, stop-loss orders will most likely be placed below $42.65 or $40.14 depending on risk tolerance.
Cisco Systems, Inc. (CSCO)
Active traders often spend countless hours scouring the charts to find chart patterns such as the inverse head and shoulders pattern. A break above the neckline, marked by the dotted trendline, is often the level that is used for determining the placement of buy-stop orders.
In the case of Cisco Systems, Inc. (CSCO), traders will want to note how the neckline and the 200-day moving average are both trading near the psychological $50 level. If earnings turn out to be better than expected, it could prove to be the fundamental catalyst needed to regain the uptrend and send prices toward the 52-week high of $58.26.
Splunk Inc. (SPLK)
Another top holding of the HACK ETF that could be of specific interest to active traders is Splunk Inc. (SPLK). Similar to the case of Cisco discussed above, the rise in price over the past several months has triggered a break beyond the resistance of influential trendlines.
The breakout in Splunk stock also triggered a bullish crossover between the long-term moving averages, which suggests that the company is still in the early stages of a long-term uptrend. Traders will most likely look to protect against a move lower by placing stop-loss orders below $131.62 in case of a sudden shift in fundamentals.
The Bottom Line
The cybersecurity segment of the financial markets is being fueled higher by extremely strong underlying trends and demand. Based on the charts discussed above, those who follow technical analysis may want to consider adding a position as close to current levels as possible and protecting against a sudden sell-off by placing stop-losses below the noted support levels.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.