Internet exchange traded funds are enjoying the Nasdaq Composite’s ongoing flirtation with the 5,000 area, a level last seen during the height of the technology bubble. There are several catalysts that could fuel additional near-term gains for ETFs such as the PowerShares NASDAQ Internet Portfolio (NasdaqGS: PNQI).

Our late 2014 prediction that Internet ETFs would rebound this year has been vindicated, helped in large part by a resurgent Amazon (NasdaqGS: AMZN) and a soaring Netflix (NasdaqGS: NFLX). Shares of Netflix have surged 38.6% this year while Amazon has climbed 22.3%. Consumers are increasingly turning to online avenues to cover their shopping needs, potentially supporting e-commerce companies. As the U.S. economy expands, employment rate improves and gasoline prices remain depressed, U.S. consumers will likely increase spending. [Internet ETFs Could Surprise in 2015]

Amazon and Netfix are top 10 holdings in PNQI, combining for 14.2% of the ETF’s weight. Those two stocks have contributed 45 points to the Nasdaq Composite’s 2015 gain, according to CNBC. Although PNQI has lagged the Nasdaq Composite and the PowerShares QQQ (NasdaqGM: QQQ) this year, the Internet ETF is showing signs of a technical breakout.

PNQI “shows signs of breaking out of a one-year consolidation to the upside.  Internet stocks were strong in in 2012 and 2013, but took a rest in 2014 to catch their breath. The fund’s recent move over the $68 level may suggest the start of a new leg higher and attract buyers who invest based on price charts,” according to a note published by PowerShares earlier today.

Increased Internet sector mergers and acquisitions activity, particularly among online travel firms, has been another boon for PNQI, notes PowerShares. For example, Expedia (NasdaqGS: EXPE) and Orbitz (NYSE: OWW) combine for over 2.7% of PNQI’s weight. [Internet ETFs Confirm Risk-on Rally]

Of course, Investors embrace Internet stocks and ETFs for growth. That is how the lofty multiples on the sector are commonly justified. PNQI has a P/E ratio of almost 33.7 and a price-to-book ratio of 4.53. By comparison, QQQ’s P/E is just 20.6. However, PNQI’s multiples are arguably justified.

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