The 3 reasons you should buy tech stocks now: Analyst

After a fairly dismal month amid earnings, the tech sector has rallied through May, and the upswing is giving some investors hope.

The SPDR Technology Sector ETF (XLK) is closing back in on $45, which Oppenheimer technical strategist Ari Wald believes is a new point of resistance. Tuesday on CNBC's "Trading Nation," Wald gave three reasons why large-cap tech could see a sustained turnaround after experiencing chaotic ups and downs since June of last year.

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First, the market looks to be at a "much stronger" level than when the XLK was around $45 last December.

Second, Wald notes that semiconductors are part of the XLK's upswing. The semis "tend to be more cyclical in nature," and that is generally "a healthy signal when we see that market embrace that cyclicality."

In fact, Crossing Wall Street editor Eddy Elfenbein pointed out that the majority of tech stocks actually reported decent first-quarter results, but these were overshadowed by the struggling big names.

"For the most part, tech stocks reported pretty good earnings. Only 18 percent of tech stocks in the S&P 500 missed earnings," he said. "Unfortunately, that included Google, Apple and Microsoft. That's about $1.5 trillion [in market capitalization] right there. But for the most part, the earnings outlook has improved very much for tech stocks."

Finally, Wald shows that the XLK still holds a bullish trend against the S&P 500. The XLK's performance over the S&P 500 leads Wald to believe that tech could be "not only a leader over the coming year, but over the coming years."

The XLK closed the day at $44.19, just below the $45 resistance level indicated by Wald.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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