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Nvidia and two other tech stocks could continue to lead sector higher: Charts

Ivana Freitas
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Tech back on top and these stocks are leading the way

Tech stocks have rallied back in the green for the year.

The XLK technology ETF is up 2% in 2020, the only positive S&P 500 sector, and some of its top stocks are leading the way -- PayPal, Nvidia, Microsoft, AMD and Adobe are all up double digits this year.  

Craig Johnson, chief market technician at Piper Sandler, has a bullish outlook for these tech stocks and sees room for further upside.

"If we take a look first at this Nvidia chart, here's an example of a stock that's come back, retested a longer-term uptrend support line, and is now getting very close to breaking out to all-time new highs," Johnson said on CNBC's "Trading Nation" on Thursday. 

Microsoft and Adobe also demonstrate promising upside for the XLK. Johnson says. Microsoft, for example, is "getting very close to new all-time highs," whereas Adobe saw a successful "retest of a very long-term uptrend support."

"From my perspective I want to be a buyer of these stocks in here, and I think as you look forward into the end of this year, I think the market will go higher. I think it would be led by tech," Johnson said.

After such steep declines, Joule Financial President Quint Tatro said, investors should use this time to book profits, given high valuations. 

"The XLK as a whole, the technology sector ETF, is trading 17 times sales, which is only slightly off the high of [Dec. 31, 2019] and we're starting to see those sales decline across the board." Tatro said during the same segment. "So, regardless of the moves, we view it as a great opportunity to book some gains and, and protect further opportunities, down the road."  

The XLK ETF trades at a nearly 22 times multiple. The S&P 500, by comparison, trades at 20 times forward earnings. 

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