Lately, many stocks have been rallying off major support levels, particularly in the technology sector.

And this is leading to great trading opportunities.

Not everyone agrees, of course. Part of the debate is about the correlation between interest rates and their effect on certain parts of the market.

When it comes to the technology sector, higher interest rates have often resulted in lower stock prices… However, there is a historical precedent for tech stocks and interest rates to rise together. So we can’t get too attached to thinking that tech stocks can’t rally just because interest rates are high.

I won’t get into the nuts and bolts of interest rates today. Instead, I’ll cover two specific technology stocks that are moving higher…

The first stock I want to dive into is California software company Salesforce.com (CRM).

This stock topped last year around Labor Day while other stocks kept marching higher into the end of the year. But now, it looks to have formed a bottom…

In technical analysis, “support” refers to a price level that an asset refuses to fall below for a period of time. In this case, support formed near the $200 level – right around the point where CRM broke out last August.

The rally didn’t last too long. From its high last September, the stock has been in an overlapping, choppy pattern as marked in the red dashed lines.

But as technical analysis tells us, this type of price action is almost always the result of a correction and NOT a significant top in place. And so far, that support level has held, and the stock has moved higher.

Another high-flying tech stock that suffered a recent severe correction is security-software company Zscaler (ZS). Take a look at the chart below…

First, notice the red line. This is the 200-day moving average (“200-DMA”), which usually acts as important support or resistance (in this case, support). Secondly, you’ll notice the green labels that mark a perfect “five waves” down.

In technical analysis, this is a classic Elliott Wave pattern. Five waves up or down like this mark the END of a move. So in this case – as I recently showed my Ten Stock Trader readers – it was clear that the move down was largely complete.

Also, let me draw your attention to the relative strength index (“RSI”) at the bottom of the chart. This is a great way to see when a stock is oversold and due for a rally.

Note the blue circles – each time the RSI moved this low, it was a buying opportunity for ZS. And recently, the RSI hit this level once again.

Combine all three of these technical factors, and the stock should rally at a minimum back to test the $200 level, if not reach a new all-time high. We already captured part of that potential move in my Ten Stock Trader newsletter, locking in gains of 56% in less than a week.

The evidence continues to show more opportunities are popping up as big-time tech stocks hold important support levels. Make sure you’re on board in this sector today.

Good trading,

— Greg Diamond

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Source: Daily Wealth