The impact of the changes due to advancement in robotics and automation spans from your future job prospects to your portfolio. Unsurprisingly, retail investors from around the globe are looking for ways to profit from this macro-level trend, and for many, the answer seems to lie in niche exchange-traded products. In this article, we take a look at the chart patterns that have started to appear throughout this dynamic sector and try to determine how traders will position themselves over the weeks and months ahead. (For further reading, see: Investing in Robotics Through ETFs and Stocks.)
Global Robotics and Automation Index ETF (ROBO)
Investors seeking to gain exposure to the rapidly growing area of robotics, automation and artificial intelligence may want to consider the Global Robotics and Automation Index ETF. Fundamentally, as the name suggests, the ETF comprises companies that produce enabling technologies and applications that have the potential to be a driving change and propel economic growth and productivity. More specifically, the fund is composed of 88 companies from across 14 countries, and its holdings range in scale from small cap to large cap.
Taking a look at the chart below, active traders will be quick to notice a well-defined inverse head and shoulders pattern as marked by the callouts. As you may know, this pattern is commonly used to spot changes in major trends, and the recent move toward the neckline of the pattern is causing the fund to appear on the watch lists of many followers of technical analysis. A break above the dotted trendline will likely trigger a flood of buy-stop orders and could act as a catalyst to a flurry of upward momentum. In the event of a breakout, short-term target prices will likely be set near $45.50 or the 2018 high of $46.20, depending on risk tolerance. (For further reading, see: Robot ETFs Are Coming of Age.)
[Learn how to develop a trading plan based on formations such as the inverse head and shoulders chart pattern in Chapter 5 of the Technical Analysis course on the Investopedia Academy]
Oceaneering International, Inc. (OII)
Another interesting chart pattern from within the robotics and automation segment belongs to Oceaneering International. As you can see below, the dotted trendline has acted as a predictable guide for determining the placement of buy and stop orders. The increase in demand since early April has sent the price above the key resistance areas identified by the 50-day and 200-day moving averages. The break above the horizontal trendline also triggered a bullish crossover between the two moving averages, as shown by the blue circle. This long-term buy signal, known as the golden cross, is often used to mark the beginning of a long-term uptrend and could be a reason that traders start to enter long positions near current levels. Stop-losses will likely be placed below the combined support in case of a sudden surprise in the fundamentals, but based on the charts, it appears as though there is little concern of this getting triggered in the short run. (For more, see: Robotics ETF Hits Illustrious Milestone.)
Intuitive Surgical, Inc. (ISRG)
There are few other companies that are better examples of automation and robotics than Intuitive Surgical. For many, it seems as though the company has traded within a perpetual uptrend, and based on the weekly chart shown below, you can see that the intense upward momentum doesn’t appear to be slowing. The recent break above the dotted trendline clears the last standing level of resistance and suggests that the stock could be poised for an even sharper ascent over the coming weeks or months. Stop-losses will likely be placed below $475 in the event of a rare but possible pullback. (For further reading, see: Participate in the Tech Rally With These ETFs.)
The Bottom Line
Robotics and automation is a major macro-level trend that investors around the globe ought to be paying attention to. Exchange-traded products such as ROBO or top holdings such as those mentioned could prove to be ideal ways to gain exposure to the run higher. (For more, see: AI, Blockchain and Robotics ETFs Dominate.)
Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.