Is Now the Optimal Time to Buy the iShares U.S. Technology ETF (IYW) Based on Technical Signals and Long-Term Sector Fundamentals?

The iShares U.S. Technology ETF (IYW) has long been a bellwether for the tech sector's highs and lows. As of July 2025, the question on every investor's mind is whether now is the right time to jump in. Let's dissect the technical signals and sector fundamentals to separate the noise from the signal.

Technical Signals: A Mixed Bag of Momentum and Caution

IYW's technical picture is a classic tug-of-war between bullish momentum and overbought warnings. The Relative Strength Index (RSI) across 9-day (61.80%), 14-day (65.77%), and 20-day (66.17%) periods all hover near overbought territory (above 60). While this suggests strong recent performance, it also raises the risk of a near-term pullback.

The Moving Average Convergence Divergence (MACD) offers a clearer bullish signal. On July 7, 2025, the MACD line crossed above the signal line, triggering a classic bullish crossover. The histogram, which measures the gap between these lines, is expanding, indicating growing upward momentum. This is a green light for trend-followers, but it must be paired with caution.

Meanwhile, the moving averages paint an undeniably bullish picture. The 5-day (178.24), 20-day (175.17), 50-day (166.91), and 200-day (156.95) averages all show multi-month gains, with the longer-term averages up 16-19%. This suggests IYW is in a strong uptrend, supported by institutional buying and sector strength.

However, the trend strength isn't entirely harmonious. On July 22, IYW dipped 0.99% on thin volume, triggering conflicting signals: a Slingshot Bullish pattern (hinting at upside potential) and a Bearish Engulfing candle (a warning of weakness). This duality underscores the ETF's vulnerability to profit-taking or macroeconomic jitters.

Fundamentals: AI and Semiconductors Power the Long-Term Case

While technicals are a mixed bag, the long-term fundamentals for the U.S. tech sector are robust. The AI revolution is the headline act. In 2025, the sector is transitioning from the “picks and shovels” phase of infrastructure (semiconductors, cloud storage) to the application layer (software, AI platforms).

Semiconductor companies like NVIDIA and AMD are leading the charge, building the hardware that powers generative AI. Their end-to-end solutions for AI chips and systems have made them indispensable to cloud providers and enterprises. Meanwhile, software firms like ServiceNow and Shopify are leveraging AI to automate workflows and enhance productivity, creating new revenue streams.

The economic backdrop also favors tech. With inflation easing and interest rates expected to trend lower, capital-intensive sectors like semiconductors and software will see improved borrowing conditions. Additionally, the “smartphone on wheels” trend—where vehicles become increasingly digitized—is boosting demand for chips, benefiting companies like ON Semiconductor and NXP Semiconductors.

Investment Advice: A Calculated Bet

So, is now the optimal time to buy IYW? The answer depends on your risk tolerance and time horizon.

For long-term investors, the case is compelling. The tech sector's growth drivers—AI, digitization, and semiconductor innovation—are structural forces that will shape the economy for years. IYW's exposure to these trends makes it a no-brainer for those with a 5+ year horizon.

For short-term traders, the technical signals suggest a more cautious approach. The overbought RSI and conflicting candlestick patterns (like the Bearish Engulfing on July 22) indicate volatility ahead. A pullback to key support levels (175.96, 174.49) could present a buying opportunity, but investors should wait for a confirmed breakout above the 179.06 resistance level before committing.

Final Thoughts

The iShares U.S. Technology ETF is at a crossroads. Technically, it's a high-momentum play with risks of near-term consolidation. Fundamentally, it's a gateway to the AI revolution and the semiconductor boom.

If you're bullish on the sector's long-term potential, now could be a strategic entry point—provided you're prepared to ride out short-term turbulence. But if you're spooked by the overbought RSI and mixed trend signals, patience might be the better virtue. Either way, IYW remains a critical piece of the tech puzzle in 2025.