Why this tech ETF could be a Buy heading into next month

From Andrea Kramer:

The U.S. stock market is set to wrap up a banner June, with the S&P 500 Index (SPX) fresh off all-time highs. What’s more, several sectors could continue to shine in July, if recent history is any guide. In fact, the Technology Select Sector SPDR Fund (XLK) emerged as one of the best exchange-traded funds (ETFs) to own next month, having ended July higher 100% of the time in the past 10 years.

Below are the 20 best ETFs for July, looking at historical returns over the past decade. To make the list — cultivated by Schaeffer’s Senior Quantitative Analyst Rocky White — the funds had to have at least eight years’ worth of returns. As you can see, XLK is the only ETF with a 100% win rate, averaging a very healthy monthly gain of about 4%. Digging deeper, XLK hasn’t ended July lower since dropping 2.4% in July 2008.

Shares of the fund — which sports Apple (AAPL) and Microsoft (MSFT) among its top holdings — notched a record high of $79.70 on May 1, before suffering a steep pullback. However, following a bounce off the 160-day moving average, XLK has erased nearly all of those losses, and is once again within a chip-shot of new highs. In fact, from the ETF’s current perch around $77.96, another 4% rally in July would place it above $81 — in uncharted territory.

XLK chart june 28

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Of course, the technology fund’s short-term trajectory could be determined by what goes down at this week’s G-20 summit. President Donald Trump and Chinese President Xi Jinping are set to talk trade, and headlines out of Japan (where the G-20 conference is being held) could certainly move stocks with heavy China exposure, which includes many chipmakers like XLK-held Intel (INTC).

In any event, traders looking to speculate on XLK’s short-term trajectory should consider options. The fund’s Schaeffer’s Volatility Index (SVI) of 19% is in just the 17th percentile of its annual range, indicating near-term options are pricing in relatively modest volatility expectations for the shares. Or, for investors who would rather play individual equities, check out the best stocks and worst stocks for July.

The Technology Select Sector SPDR ETF (XLK) was trading at $78.18 per share on Friday afternoon, up $0.13 (+0.17%). Year-to-date, XLK has gained 22.63%, versus a 10.24% rise in the benchmark S&P 500 index during the same period.

XLK currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 79 ETFs in the Technology Equities ETFs category.

This article is brought to you courtesy of Yahoo! Finance .