Why the HACK ETF Can Gain 50% More in 2015

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From governments to corporations to folks like you and me, privacy and security in cyberspace has become an incredibly growing need. Years ago, we were able to minimize or completely avoid the risks of having personal information online. Nowadays it’s all out there for anyone to hack away and obtain.

pure-funds-185That growing need for cybersecurity couldn’t be a better fundamental driver for the well-defined group of companies that make up the Purefunds ISE Cyber Security ETF (HACK).

The skinny on the HACK:

This ETF, constructed of more than 30 companies, represents a sector of the tech market that will have to grow quickly to meet increasing security needs. HACK holds cybersecurity companies such as Cyberark Software (CYBR), FireEye (FEYE) and Infoblox (BLOX) that are poised to soar as spending on Internet security expands at a rapid rate.

And at 0.75% in expenses, or $75 annually for every $10,000 invested, it’s not cheap as far as index funds go, but the growth potential is worth the price.

The fundamental story behind the HACK ETF is enough to attract long-term investors, but the technical picture takes the ETF to another level of must-have for growth investors.

Let’s take a look.

How HACK Is Hacking It

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To date, HACK units have returned more than 25% compared to the S&P 500’s gains of 2% and the Nasdaq Composite’s 6.9%.

The recent parabolic rise over the last two weeks has attracted the attention of technical buyers as average daily volume has increased 136% over the past 10 trading days. Typically, we’re afraid of parabolic trends as they are often likely to lead to corrections, but there’s a big exception:

That’s when a stock or ETF is in the early stages of an “acceptance” phase, just like the HACK ETF is in right now. An “acceptance” phase of a rally occurs when investor sentiment starts to swing from pessimistic extremes as investors buy into the fundamental and technical trends.

Short interest on the HACK shares has been on the rise, just as shares have been on the rise. Though not at the level that we normally consider a trigger for a short covering rally, the bearish bets indicates growing pessimism.

Similarly, our proprietary “Component Weighted Short Interest Ratio” for the HACK shares shows that short interest among the companies that make up the HACK is nearing short squeeze levels. Another sign of growing pessimism toward this market leader comes from our proprietary Composite Analyst Rank Index, which shows that only 60% of the analyst covering the 32 stocks that comprise the HACK have them ranked a “buy.”

The improving fundamental and white-hot technical pictures will garner analyst upgrades over the near-term, which in turn will act as a catalyst for higher prices.

Bottom Line

We expect to see a short-term pullback in HACK prices at some point, as the ETF has crossed well into technically overbought conditions.

Still, that’s not stopping us from liking this fund at its current price; we would simply dollar cost average into any weakness, as this ETF is a clear long-term outperformer.

Watch for HACK to tack on another 50% gain from here through year’s end.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/hack-etf-cybersecurity-stocks/.

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