3 Ways to Trade the Rise in Robotics and Automation

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3 Ways to Trade the Rise in Robotics and Automation

The effects of advancements in robotics and automation range from your future work prospects to your portfolio. Unsurprisingly, ordinary investors all around the world are seeking for ways to benefit from this macrotrend, and for many, the solution seems to be in specialized exchange-traded products. In this article, we look at the chart patterns that have begun to emerge in this volatile sector and attempt to predict how traders will position themselves in the next weeks and months. (For further information, see Investing in Robotics using ETFs and Stocks.)

Investors interested in gaining exposure to the fast rising fields of robotics, automation, and artificial intelligence may explore the Global Robotics and Automation Index ETF. Fundamentally, as the name implies, the ETF is made up of firms that develop enabling technologies and applications with the ability to drive transformation and boost economic development and productivity. More precisely, the fund is made up of 88 firms from 14 different nations, with assets ranging from small company to big cap.

Looking at the chart below, active traders will note a well-defined inverse head and shoulders pattern, as indicated by the callouts. As you may know, this pattern is widely used to detect shifts in significant trends, and the fund’s recent rise into the pattern’s neckline has caused it to come on the watch lists of many technical analysts. A break above the dotted trendline will almost certainly result in a deluge of buy-stop orders and might serve as a catalyst for a burst of higher momentum. If a breakthrough occurs, short-term targets will most likely be established between $45.50 or the 2018 high of $46.20, depending on risk tolerance. (For more information, see Robot ETFs Are Growing Up.)

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OceaneeringInternational has another fascinating chart pattern in the robotics and automation market. The dotted trendline, as shown below, has served as a reliable reference for deciding the placement of buy and stop orders. Since early April, the price has risen above the critical resistance levels suggested by the 50-day and 200-day moving averages. As demonstrated by the blue circle, the break above the horizontal trendline sparked a bullish crossing between the two moving averages. This long-term purchase signal, known as the golden cross, is often used to suggest the commencement of a long-term uptrend and may be the reason traders begin to take long positions around present levels. Stop-losses will most likely be set below the combined support in the event of a fundamental surprise, but based on the charts, there seems to be little fear that this will be triggered in the near term. (For more information, read Robotics ETF Passes Another Milestone.)

Few businesses are greater examples of automation and robots than Intuitive Surgical. For many, the firm seems to be in an indefinite upswing, and the weekly chart below shows that the powerful upward momentum does not appear to be decreasing. The latest break above the dotted trendline clears the final remaining level of resistance, suggesting that the stock is prepared for an even greater advance in the next weeks or months. In the case of a rare but conceivable downturn, stop-losses will most likely be put below $475. (For further information, see: Take Part in the Tech Rally With These ETFs.)

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The Bottom Line

Robotics and automation are key macro-level trends that investors all across the world should be aware of. Exchange-traded instruments like ROBO or top holdings like those listed might be good methods to acquire exposure to the rally. (For more information, see AI, Blockchain, and Robotics ETFs Take the Lead.)

StockCharts.com provided the charts. Casey Murphy had no position in any of the securities mentioned at the time of publication.

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