It is hard to ignore the growing worldwide interest in fields such as robotics and artificial intelligence. However, from the standpoint of an active trader, the present chart patterns on a few important assets within this category imply that it may be preferable for the bulls to stay on the sidelines while a short-term decline takes its course. In this post, we’ll look at chart patterns of relevance and attempt to predict how technical traders will position themselves in the next weeks. (For more information, see: This New Trend Makes Robotics an Industry to Watch.)
The Global X Robotics & Artificial Intelligence Thematic ETF is one of the most popular exchange-traded funds utilized by the retail investing community to obtain exposure to the expanding area of robotics and artificial intelligence. Few other products provide this level of exposure, with net assets of little over $2 billion and stakes in industrial robotics and automation, non-industrial robots, and autonomous cars. Looking at the chart, it is clear that the price has been trading inside a falling channel pattern since early this spring. From a technical standpoint, it is also worth noting how the 50-day moving average has constantly behaved as a point of resistance and has provided successful entry locations for short sellers on each attempted breakthrough. Despite the recent rally, active traders are likely to remain pessimistic on the market, and bulls may be better off waiting for a better risk-to-reward combination. (For more information, see Robot ETFs Are Growing Up.)
There are just a few companies in the area of robotics in the healthcare industry that can compete with Intuitive Surgical’s degree of dominance. Looking at the weekly chart below, you can see that the company’s performance has richly rewarded investors over the years, and it seems to continue doing so for the foreseeable future. However, based on the chart, it seems that the bulls may wish to wait for a downturn in order to acquire a more advantageous risk/reward before placing their orders. Take note of how the relative strength index (RSI) indicator has been going lower as the price has consistently marched up, despite the fact that it is presently trading in overbought zone over 70. This negative divergence indicates that the bulls are losing faith in the upswing and that a drop is possible. Active traders should wait to see if they can purchase closer to the lower trendline or the 50-week moving average, both of which are now trading at $430. (For more information, see: 4 Industries That Robots Are Revolutionizing.)
Few firms are better positioned than NVIDIA to capitalize on the worldwide trend of rising demand for robotics and artificial intelligence. The producer of the chips that power many of the items has been trading in one of the market’s best uptrends, but the chart suggests that the momentum may be fading. It is clear that the trend is not going as quickly as it once did and has begun to drift sideways throughout the most of 2018. Active traders will most likely keep an eye on this chart to determine whether a break below critical support levels results in a better entry position. (For additional information, read 3 Ways to Profit from the Rise of Robotics and Automation.)
The Bottom Line
The growth of robots, automation, and artificial intelligence is difficult to ignore, but from the standpoint of an active trader, a retreat over the next several months looks to be in the cards. Bullish traders may want to wait for a more attractive risk/reward ratio before entering a position. (For additional information, read Another Robotics ETF Is Here.)
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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