The charts for technology stocks are forming a bullish pattern that points to a breakout, according to one analyst.
"The trend is higher, and technology remains the bedrock of this bull trend. It's going higher," Rich Ross, Evercore ISI's head of technical analysis, said in an interview Tuesday on CNBC's "Power Lunch."
Tech stocks are in a "very strong trending cyclical bull market here that's really just begun; let's call it early- to mid-innings, at its latest," he added.
A popular exchange-traded fund that tracks the Nasdaq 100, the QQQ, hit a record high in Tuesday trading as the index rose nearly 1 percent and the Nasdaq composite crossed 6,000 for the first time ever. Examining a chart of the QQQ, Ross pointed to parallels between the fund's technical pattern over the last three years and its pattern in 2012, when the ETF was trading at less than half its price today.
"I think that '14, '15, '16 are a lot like 2010, '11 and '12," Ross said.
Calling the longer-term technical pattern "stupendous," Ross pointed to substantial drawdowns following points of support in 2012, and then again in late 2015 and early 2016 — both declines that gave way to new highs. After the QQQ broke out of the range Ross identifies, it rose 66 percent, from January 2013 to July 2015.
"You have to stay long technology; it's an overweight, it's a buy,
Indeed, technology is the best-performing sector year to date, up over 14 percent, nearly double that of the S&P 500.
Examining a shorter-term technical pattern for the QQQ, Ross sees additional bullish underlying trends. The fund traded in a four-month sideways range going into the November election, Ross pointed out, "and then we came out of it like a cannon, up 10 percent over two months." In a smaller fashion, the stocks have broken out from a smaller trading range and headed higher just this week.
As earnings season heats up this week and next, tech stocks will prove to be rather strong, said 55 Capital market strategist Max Wolff.
Wolff said it's crucial to consider that the QQQ is market-cap weighted, "so it's a small number of companies that have done very well that is creating this notion that all the boats are rising with the ride. Really, not all the boats are. That being said, we think the earnings season will be pretty good," Wolff said Tuesday on CNBC's "Power Lunch."
As tech stocks stand to benefit from a potential repatriation of cash from abroad under the Trump administration, Wolff predicted that tech stocks appear fundamentally well-positioned going forward.