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Technical Set-Up In Semis – INTC, SNDK, AMD, NETL, DIA
November 4, 2009
BY Dennis Hobein:
Contributor, Stock Traders Daily
Real Time Trading Reports: Included are detailed trading reports designed to help investors realize opportunities in these companies. The reports are linked to the stock symbols in the article below.
(La Jolla, CA) The stock market is exhibiting broad strength today – the Diamonds Trust (NYSE: DIA) is currently up 1.2% -- following an encouraging set of economic data that was reported earlier this morning. Specifically, the ADP employment report showed that payrolls declined 203,000 in October, slightly ahead of the Street’s expectation of -198,000, but an improvement over September’s number of -277,000. Additionally, MBA mortgage applications showed considerable improvement for October, at +8.25%, and auto sales grew to 10.45 million from 9.2 million last month. On the NYSE, advancers are clobbering decliners by more than a 2-1 ratio and most major sectors are in the green today. However, one sector that has been a clear leader today is the semiconductor industry.
The
Philadelphia Semiconductor Index, or SOX as it is
commonly referred to, is up about 2% today and is now
approaching a key level. When the stock market began to
pull-back in mid-October, the SOX sharply sold-off and
fell below its 50-day moving average and eventually
broke a support level at $300. After
forming a “morningstar doji” yesterday – a candlestick
chart formation that commonly indicates a reversal – the
SOX gapped up today at the open and is threatening that
$300 level (now resistance). A break through that $300
level could be a sign that semiconductors are ready for
another leg higher. In terms of specifics stocks, a few
widely followed names that are components of the SOX,
and also share this same technical set-up, are Intel (Nasdaq:
INTL), SanDisk (Nasdaq:
SNDK), and Advanced Micro Devices (NYSE:
AMD).
Besides the interesting technical pattern we just highlighted, the semiconductor industry received a boost when NetLogic (Nasdaq: NETL) reported its third quarter results last night which topped analysts’ expectations on the top and bottom lines. Additionally, the company raised its revenue and EPS guidance for fiscal year 2010. This follows a similar trend in the industry. With third quarter earnings season winding down, it is fair to say that semiconductor companies have outperformed the Streets’ expectations – by wide margins in some instances. There are two fundamental reasons for this: 1). Enterprise and corporate spending for IT-related products and services is recovering, and 2). Analyst estimates still seem to be overly conservative. These factors and the intriguing technical set up may provide investors and traders with opportunities to get long in semiconductor stocks as we move through the fourth quarter. However, we suggest reading our free trading reports on these stocks first to develop a more specific trading strategy.
Headlines and Special Reports:
- On The Move: LHO, HST, XRX, ABT, JNPR
- Lower Prices and Better Products: MSFT, SNE, NTDOY, ERTS
- On the Move: URE, UNG, UYM, FSLR
- Battle for Center Stage – AAPL, PALM, RIMM, VZ
- The Post-Labor Day Trade: SPY, C, BAC, FNM, FRE
- Inflation is coming: GLD, UGL, DGL, PST, TBT
- Beginning of Consolidations: CAL, AMR, UAUA, XAL
- Talk Up The Dow, Not The Economy: BAC, F, GS, XOM
- The Next Chapter in the Google vs. Microsoft Rivalry: GOOG, MSFT, AMZN, AAPL
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