The First Trust NASDAQ Cybersecurity ETF (CIBR) has become a primary battlefield for two of the market's most aggressive narratives. On one side, you have the essential utility thesis. That’s the idea that in an era of state-sponsored hacks and artificial intelligence (AI)-generated deepfakes, cybersecurity is the only non-discretionary spend left in tech. We can’t afford not to have that protection. Sort of like auto insurance, or flood insurance if you live in South Florida.
On the other hand, you have a punishing correction in valuations. That might become a true long-term reset. That’s taken the highest-quality software names out to the proverbial woodshed.
The bull narrative is driven by the sheer scale of the current threat landscape. We are no longer just fighting human hackers; we are fighting agentic AI. This is a 1980s sci-fi movie playing out for real, and in real time.
Unlike marketing software or HR tools, cybersecurity is now a board-level mandate. Global spending is projected to exceed $520 billion this year. The bear narrative isn't about the need for security; it’s about the price investors are willing to pay for it.
That’s why CIBR is an exchange-traded fund (ETF) I track regularly. It is different from many other tech ETFs in that it actually invests in a set of stocks that act as a thematic carve-out of the technology sector. Importantly, while CIBR is correlated to the broader tech space, it is not yet to the extent where it is rendered unimportant in building ETF portfolios. That’s something I can’t say for many other tech ETFs.
A Closer Look at CIBR
Here’s a look at CIBR’s top-heavy $10 billion-plus asset base. 45 stocks, but 58% of assets under management (AUM) is occupied by the top-10 holdings.
Returns have been solid, which is no surprise. But that’s the past. And at 25x earnings, with a very mixed bag type of outlook (need vs. valuation), that’s only modestly comforting to me.
CIBR’s chart looks somewhat encouraging. Here’s the daily, and I see a path to the old high around $78. That would be a 20% move if it happened. For a volatile theme like this one, I won’t look at an ETF if I think it can’t make at least 10% for a trade. So CIBR clears that bar.
The weekly is where the potential attraction is for me. See that 20-week moving average in red? It has already slowed down, like a car coming to a stop sign. Now, will the car stall, or will it speed ahead once it comes to a full stop? That’s a few weeks away from being determined.
The PPO indicator at the bottom is even more intriguing to me. A high-confidence sign that the recent tech pullback was just another flesh wound and nothing more is pictured in that indicator. Specifically, if it crosses positively (black line above blue line), it could set up for a nice move soon. Look no further than late 2022, when the same setup produced a near double in CIBR’s price.
CIBR’s ROAR score tells a familiar story when it comes to the AI/tech trade over the past few years. Just this year, those red signals helped offset a 10% dip and 5% dip. And while the current score has lifted to 60, I’d rather see a more sustained stay at that level or higher before committing to a rebound that can stick. ROAR is not primarily a trading tool. It is a risk-management tool. That’s a big difference. Ask any experienced trader or investor.
The Bottom Line
CIBR is what I’d call a suspect for an ETF portfolio. Not yet a prospect, which is the step before it is a member of a portfolio. But it is getting close to moving beyond that suspect tag.
Recent price action at the stock level within this group is either a massive spring-loaded opportunity for an AI-recovery trade, or a warning that the software cycle is permanently disconnected from the hardware boom. CIBR is one to put a bookmark on, to come back to soon.
Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob's written research, check out ETFYourself.com.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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