Trading robotics stocks

January 26, 2018 12:16 PM
Applying classic chart patterns to current trading opportunities

The re-awakening of Artificial Intelligence (AI) and constant technological advancements have given a rebirth of robotics in the recent years. An open-source based Robotics Operating System (ROS) supported by Google (GOOG) has changed the robotics field for everyone to build faster and lower-cost robotics applications, machinery in new start-up companies. Exploitation of new Graphical Processing Units has enabled the existence of Big Data, computer vision, deep-learning and machine learning to further accelerate advances in both the AI and robotics fields.

Robots & Jobs

Most analysts believe robots will disrupt the labor markets. It is expected that about five million jobs may be lost by 2020 in many industrial countries with the use of robots. It is also expected that with machine and deep learning, robots will improve 50% of manufacturing tasks and processes, resulting in efficiency gains.  Robotics disruption may result in a loss in lower salary cost jobs, but they also will create jobs in engineering, programming and management sciences. 

Collaborative Robots (Co-bots) work alongside humans, assisting them with multiple tasks. Co-bots are used everywhere: In offices, homes, hospitals, farms, distribution centers and warehouses. Co-bots are small, plug-and-play and highly adaptable. The recent advancements in computing power, sensors and technology may see a massive growth in co-bots. 

In the next few years, Robotics will see further growth and expand into all industries, markets, and geographies. Robotics may grow out of its niche field in manufacturing to become as ubiquitous as computers.  The industry expansion is currently growing at a rapid pace in automation with surgical robots and consumer robots.  

Investment Opportunities

There has been a massive advancement in the technology of robotics globally in the last two years. Robotics and automation are firmly set on a long-term growth trajectory supported by a unique combination of accelerating technological advances and powerful macro factors. The United States and China are at the front of its advancements. In 2016, industrial robots have seen more than 12% growth in North America. Germany, Canada, Japan, and China have seen similar growth. About 25% of all robots are sold in China; and by 2020, about 40% of all global robots volume will be sold in China. 

There are many robotics and related technology companies worldwide that are publicly traded, but two unique ETFs are designed to capture this growth on the U.S. exchanges. They are: ROBO Global Robotics Index ETF (ROBO) and Globalx Funds thematic fund called Robotics & A.I. ETF (BOTZ). Other publicly traded companies in the robotics and its related areas include: ABB Robotics (ABB), Google (GOOG), Amazon (AMZN), Brooks Automation (BRKS), Cognex (CGNX), Intuitive Surgical (ISRG), iRobot (IRBT), Mazor Robotics (MZOR), Rockwell International (ROK), and Trimble Navigation (TRMB). 

“Sector to watch,” below,  shows the 2017 year-to-date performance of these robotics and automation companies and ETFs. 

Chart Patterns in Robotics Stocks 

Let’s discuss some of the current chart patterns in a few above-mentioned stocks.

Mazor Robotics had a breakout year in 2016, as its stock price more than doubled with the resurgence of the robotics and AI fields. Mazor continued to rally in 2017, as the stock went up more than 163% in an ABC bullish pattern, which developed from January 2017 to June 2017 (see “Trading ABC Patterns,” Modern Treader, December 2016.  The “C” retracement into AB leg is 64.5%. A long entry was triggered when the price was closed above $32.88 (see “Mazor trigger,” below). A stop is placed below $29.55 with target ranges at $45, $61 and $86. Currently, price reached its second target zone above $61. 

ROBO ETF is designed to capture the rapid developments in technologies like computing, AI, robotics, computer vision and machine learning in global economies. This ETF follows a modified equal weighting scheme and re-balances every quarter. ROBO was constructed in October 2013 and has seen parabolic growth in 2016 and 2017. ROBO formed a Parabolic Arc pattern since 2016, and it may be in the growth phase of its trend. But on a cautionary note, most Parabolic Arc patterns do retrace 50% to 62% of its prior rise, once they reach an unstable asymptotic levels (see “Parabolic Arc: What Goes Up..." Modern Trader, November 2016). ROBO may not be ready to trade this Parabolic Arc pattern yet but it is wise to keep in mind the old adage of “What goes up, must come down.”   

About the Author

Suri Duddella