These two types of stocks will propel the market higher: Trader

The S&P 500 has fallen into a trading range as of late, but one trader has identified two industry groups as drivers of another market rally.

Todd Gordon of took a look at Monday's top sectors, which featured information technology and health care as the two leading market sectors that day. Tech was up nearly 1 percent Monday morning thanks to strong earnings in the category, while health care was in second with a 0.5 percent rise.

At this point, the key to the next market breakout lies within these two sectors, Gordon contends.

The first group to watch is the semiconductors, according to Gordon. They have been a bit flat as of late, but he sees promising times ahead for the tech subgroup.

Looking at a 60-minute chart of the semiconductors ETF, SMH, Gordon points at what is called a "bull flag," which is a consolidation pattern that is thought to typically precede a breakout to the upside.

"The consolidation has certainly been in play," Gordon said Monday on CNBC's "Trading Nation." "But it looks like we're just about to break through this little downtrend resistance here, which will bring in more buyers in the SMH."

The semis are currently up 19 percent year to date, as the ETF hovered at $63 on Monday.

Gordon's second pick for a market breakout lies with biotech, another group that has seen an impressive run as of late. Coming off of a strong second-quarter earnings season, the Nasdaq biotech ETF, IBB, hit a sixth-month high on Monday morning, and Gordon believes the charts promise more room to move up.

"We've broken recent resistance that will now act as support around the $290 mark in IBB," he said.

Given that semis and biotech look ready for another move up, Gordon also thinks that they're worthwhile trades.

"I'm going to be looking at trades on the long side in these two ETFs to break the broader S&P 500 out of the consolidation," he said.

Overall, Gordon sees both sectors as drivers of the S&P 500, which has been "looking for some inspiration to push us out of this range that's been in play for over two weeks now."


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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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