Cart (0)
VIDEODemand Leadership From These Semiconductors
Keep in mind that with greater opportunity comes greater risk.
In any bull market, there will be sectors showing up that seem to come out of nowhere and have a hand in leading the averages higher. At the same time, there are areas that are considered the benchmarks, and without their participation any advance is considered suspect. Semis and financials are those two areas, and a trader should demand leadership from them in order for traction to take hold. Cyclical in nature, Semiconductor HOLDRs (SMH) is again at a key inflection point and is looking like the one to play. Let’s dig around under the hood a bit and take a closer look at the semi ETF as well as some of the bigger individual names that offer good buying opportunities.
The weekly chart on SMH shows that it's clearly in an intermediate uptrend off the March 2009 lows. Our bigger concern is if the longer-term trend can be sustained into a much larger rally. Higher swing highs and higher swing lows are necessary for this to occur, and SMH has traded that way on the weekly since those March lows. Given that the 50 MA is also trending up, we are in a good position to say the tide is turning. The only fly left in the ointment would be that longer-term SMH is still in a downtrend going back to June 2007, which is shown on the above chart. The two lateral trendlines mark areas of support/resistance that will be integral for SMH’s continued success. If SMH can hold above this key level around $27.30 then I’ll be a buyer longer term.
Intel (INTC) is also a name that has been showing up on my radar daily as one to watch. I have highlighted Intel in prior articles, including JPMorgan, Intel Ready to Run, and I continue to hammer on it because I find its long-term prospects so appealing. Trading at 20.80 last week, when I highlighted its prospects, Intel is still well within the buy range. The seven-month base is attractive as a launching pad, and will be a key support area should a downside reversal take place. Take a risk-appropriate position size and place a stop below this channel.
Broadcom (BRCM) is another name I find highly attractive longer term. If we can break and hold the lateral trendline going back several years, then Broadcom may be off to the races. The all-time high in Broadcom was back in 2000 at $183.18, but since 2003 Broadcom has moved mostly in a channel sideways. Enough digestion has taken place in this name to make it an attractive buy at these levels. Place a stop below recent swing lows.
The final semi that has a great future is Marvell Technology (MRVL). Unlike the previous two names, which put in decade highs in 2000, Marvell hit new all-time highs in 2006 and has since retraced 40% of that run. Even at that, Marvell is at three-year highs right now, so there isn't a lot of overhead resistance to fight through. Both the weekly and daily charts are showing signs of great support in the $20 area, and with a few more weeks of sideways action a trader would have a nice base from which to gauge later movements.
Conclusion
These names can turn on a dime. Trade only in the direction of the longer-term moving averages, and buy from areas of consolidation. With greater opportunity comes greater risk, so keep that in mind when buying into any of these names. Know your stops before putting on a trade, and cut losses while they're still manageable. With a proper entry at the right time, semis should be leadership if this rally is to be sustained.
For more from Quint Tatro including specific trades and access to his portfolio take a FREE 14 day trial to Minyanville's FlexFolio by Quint Tatro. Receive email alerts with every trade, interactive strategy sessions and much more. FlexFolio is beating S&P 500 by 25% since inception. Learn more.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
