Here’s why tech could be your best bet this earnings season

Tech could be your best bet in the new year, says one technical analyst.

The technology sector hit a fresh new high in Friday trading, and is now the best performing sector so far in 2017. As the mega-cap leaders in the group gain momentum, Ari Wald of Oppenheimer believes technology "is going to resume its longer-term trend of outperformance."

"We constantly preach that rather than market timing, you always want to consistently buy the sectors and stocks with the best relative trends, and we think tech has the best relative trends in the market right now," Wald said Thursday on CNBC's "Trading Nation."

The tech sector is up over 4 percent since the U.S. election, while the S&P 500 is up over 6 percent in the same time. But the underperformance has come into its prior breakout point at its rising 200-day moving average, said Wald. And that indicates to him that the sector will resume its longer-term uptrend that's in place. He expects technology to be a market leader once again over the coming months. The technology sector on Friday hit its highest levels since September 2000.

According to Eddy Elfenbein, editor of the Crossing Wall Street blog, earnings from big tech names over the coming weeks will show "greater division" between some of the tech winners and losers.

Tech earnings kick into high gear the week of Jan. 23, when heavyweights Apple, Amazon, Microsoft, Facebook and Alphabet all report. These stocks have all seen positive returns year to date.

Elfenbein expects a "big earnings beat" from Microsoft when it reports on Jan. 26. He owns Microsoft in one of his funds; he also likes information technology company Cognizant Technology Solutions at this juncture.

"I think overall, this is a good environment for the tech sector," he said.


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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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