Shares of Apple Inc. (AAPL) supplier Analog Devices, Inc. (ADI) gained more than 5% in the first hour of Wednesday's session after the company beat fiscal third quarter profit and revenue estimates while raising fourth quarter guidance. The bullish results should generate a steady tailwind for the broad swath of companies that make iPhone components, especially with the iPhone 8 set for release in September or October.

These symbiotic issues have underperformed their benefactor throughout 2017, with the biggest names trading well below their 2017 highs while Apple stock grinds out a series of all-time highs. This laggard behavior suggests that product lines outside the iPhone universe have weighed on results, which makes sense given the highly commoditized nature of the semiconductor business. (For a refresher, see: The Industry Handbook: The Semiconductor Industry.)

Analog Devices stock topped out at $103 in 2000 and entered a multi-year downtrend that finally bottomed out in the mid-teens in 2008. The stock returned to resistance at the 2004 swing high just above $50 in 2013 and broke out one year later, making steady progress into the May 2017 high at $90.49. It then reversed on heavy volume and sold off in a rounded correction that tested 200-day support for nearly three months.

The post-news reaction has broken the trendline of lower highs in place since June 2017 and reached the 50% sell-off retracement level above $83. The rally wave is likely to stall between that level and the .618 retracement at $85, giving way to a broader basing pattern before it tackles the multi-year high in the low $90s. Meanwhile, pullbacks to new trendline support in the $80 to $81 price zone should now offer low-risk buying opportunities. (See also: Analog Devices Beat Earnings and Revenues in Q3.)

Cirrus Logic, Inc. (CRUS) shares posted an all-time high at $61.13 in 1995 and entered a persistent decline that ground out lower lows into the October 2002 all-time low at $1.47. The stock lagged badly during the mid-decade bull market, struggling in the lower third of its multi-year trading range, and posted a higher low during the 2008 economic collapse. The stock finally completed a 100% round trip into the prior century's high in January 2017.

Cirrus Logic stock broke out in April, hitting an all-time high at $71.97 in June before turning sharply lower, dropping into new support in the low $60s. An early August plunge completed a failed breakout that reached a five-month low last week, while this week's news has completed a three-week basing pattern. This reversal should support a relief rally into new resistance, which is likely to deny bulls into the fourth quarter. iPhone hype at that time could then yield an even stronger recovery wave. (For more, see: 2 Suppliers Dependent on Apple for a Majority of Revenue.)

Skyworks Solutions, Inc. (SWKS) shares stalled at $78.25 in 2000 following a multi-year uptrend and sold off to $2.89 in 2002. The stock underperformed throughout the mid-decade bull market and tested the multi-year low in 2009, grinding out a long-term double bottom reversal. The subsequent uptick reached the prior decade's high in February 2015, giving way to a second quarter breakout to an all-time high at $112.88, followed by a rounded correction that found support in the upper $50s in 2016.

Sellers took control after a steady recovery wave reached 2015 resistance in June 2017, dumping the stock to a three-month low, ahead of consolidative price action between June's high and low. The stock struggled at the 50-day exponential moving average (EMA) into this week's news and has turned higher but not broken key resistance now centered at $103.50. As a result, interested market players should keep their powder dry, focusing on today's other entries or stalking this chart until price action sets off buying signals with a breakout toward $105. (See also: Chip Stocks Not Finished Yet, More Room to Run.)

The Bottom Line

Apple suppliers are gaining ground this week after Analog Devices reported surprisingly strong quarterly results while raising forward guidance. This bullish price action could mark the start of a long-term rally for the group, with many components set to hit new highs in the triple digits. (For additional reading, check out: Top 5 Semiconductor ETFs.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>

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