Tech is leading the market — and this stock could be the pick of the litter

Technology stocks will continue to lead the market, according to one technical analyst, who specifically recommends buying shares of hot semiconductor stock Skyworks Solutions.

"First off, we're bullish on the stock market in general, so step one, the question we have to ask ourselves is, what sector do we want to own? Answer: We think technology," Ari Wald, Oppenheimer's head of technical analysis, said Wednesday on CNBC's "Trading Nation."

The S&P 500 technology sector in Wednesday trading hit its highest level back to early 2000; a popular technology-tracking exchange-traded fund, the XLK, was trading at levels not seen since late 2000. Apple boosted the sector, as it traded at all-time highs on Wednesday and closed about 1 percent higher. Wald, observing a chart of the XLK relative to the S&P 500, noted a recent breakout above a consolidation period that's formed since 2012.

Semiconductors, from a technical perspective, stick out to Wald as a top industry pick within the sector. He noted that yet another breakout is afoot when measuring the Philadelphia Stock Exchange Semiconductor Sector Index relative to the technology sector, and sees further strength for semiconductors as a group within tech.

Skyworks Solutions, up nearly 33 percent so far this year, is one of Wald's "favorite ideas" in the semiconductors space. The chipmaker and Apple supplier on Monday was trading at levels not seen since mid-2015.

"Bit of a rotation idea here. [There was a] prior period of underperformance, beginning to shift higher, reverse higher, and I think this is playing the rotation game here within this leading group," Wald said.

Indeed, semiconductors as a group within technology do appear to have a "much brighter outlook" than perhaps the rest of the tech sector at this juncture, said Chantico Global CEO Gina Sanchez. She said certain "super trends" across technology — like companies' shift toward incorporating artificial intelligence and cloud computing — are supportive of semiconductor companies.

"On the flip side, however, you have a hardware industry that has largely not really been going anywhere in terms of innovation and in terms of new products," Sanchez said.

Another potential risk for technology in general involves pending regulatory changes regarding net neutrality, which could hurt streaming services companies, she said.

Analysts on average give Skyworks Solutions a rating of "overweight," with a slightly bearish $94.76 price target. The stock closed slightly higher on Wednesday, at $99.11 per share.


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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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