By: Rick Pendergraft

Contributor, Stock Traders Daily

Real Time Trading Reports:  Included are detailed trading reports designed to help investors realize opportunities in these companies as earnings are released.  The reports are linked to the stock symbols in the article below.

(La Jolla, CA)  This is an incredibly important week for the chip sector as third quarter earnings reports from the likes of Intel (NASDAQ: INTC), Advanced Micro Devices (NYSE: AMD), Altera (NASDAQ: ALTR), Linear Technology (NASDAQ: LLTC), Novellus (NASDAQ: NVLS) and Xilinx (NASDAQ: XLNX) are all due out this week.  The Semiconductor HOLDRs Trust will likely see extreme volatility as four of its top ten holdings report this week and three of them report on Tuesday (ALTR, INTC and LLTC).

The SMH (NYSE: SMH) has increased by 64 percent since the beginning of March, outpacing the S&P 500, which has increased 52 percent.  The SMH surged last week to close above its 100-week moving average, a trendline it has been dancing around for the last 11 weeks.  Making a significant surge above the 100-week would go a long way in proving that the recovery is real and the bullish surge is warranted.  However, the SMH is overbought when you look at the weekly stochastic readings and is close to overbought on the RSI reading.

Looking at the three components that report Tuesday, INTC is facing resistance in the 20.50 range, LLTC is facing resistance at the 28 level and ALTR is looking at resistance at the 21 level.  None of the three are in overbought territory on the daily oscillators, but LLTC and ALTR are both overbought based on the weekly stochastic readings.

As far as the sentiment readings on these three, INTC and ALTR both have short interest ratios under 2.5, while LLTC’s short interest ratio is a relatively bearish 5.5.  Analysts have a similar opinion of the three with Intel having 27 “buy” ratings, 12 “hold” ratings and only three “sell” ratings.  Altera has 14 “buys”, eight “holds” and no “sells” and Linear Technology has nine “buys”, 13 “holds” and three “sells”.

In the last few quarters, both INTC and ALTR have missed on estimates in at least one earnings report and matched in another.  LLTC has beaten estimates in each of the last four quarters.

Given the current sentiment readings on ALTR, INTC and LLTC, and given the most recent earnings performance, it seems Linear Technology has the best chance of offering up an earnings surprise.

Review our reports for Altera, Intel and Linear Technology now by clicking on the appropriate link.