Cyber Security is a growing problem in the technology world. The companies that sell cyber security solutions are associated with high multiples and strong growth as almost every client increases their cyber security spending each year. As the overall market softened, these high-multiple stocks pulled back rather hard. One ETF for the Cyber Security stocks is HACK. There are some interesting trends changing. The stock made a new one-month high this week and started to make higher lows and higher highs. The downtrend in relative strength to the $SPX has been broken today, but that is a fine line. If the ETF can start to outperform the $SPX that would be a good clue the selling is done. The SCTR is approaching 50. I like better when it is approaching 75.
The MACD is also moving back above zero which is usually a good signal that things are starting to improve. As one of the fastest-growing areas of the economy, this might be the time to start thinking about letting HACK into your portfolio. If the ETF starts to underperform in relative strength to the $SPX and moves back below the trend line, I would be inclined to have a tight stop and exit.
Greg Schnell, CMT