The Semiconductor stocks have mired in a correction along with the general markets over the past few months. These stocks were performing well earlier this year, but have been lagging other sectors as the year has progressed. There could be several reasons for this price action, from seasonality factors to fears of a deteriorating economy. In either case, several stocks in this space are rapidly approaching important levels and could be at critical turning points.
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Intel Corporation (Nasdaq:INTC) will surely be in the spotlight for the next few days after announcing an acquisition of MCAFEE, Inc. (NYSE:MFE) for a large premium. INTC has made a series of software acquisitions over the past year and it will be interesting to see if this helps or hurts the stock. INTC had a nice rally beginning in March that culminated in a gap up to the $24 level in April. INTC was unable to hold any of the gains, and retraced all the way back to the high $18 level by July. INTC attempted to bounce from this level in July, but once again quickly gave back its gains. The initial reaction to the MFE acquisition led to INTC trading lower, and INTC is rapidly approaching the bottom of its recent base again. This would be an important level to hold, and if INTC breaks down from this base it could lead to weakness for the whole group.
Cypress Semiconductor Corporation (Nasdaq:CY) is another semi conductor stock that is currently testing the bottom of its base. CY was also in a nice uptrend heading into the summer before succumbing to weakness in the sector. CY has technically been trading sideways for a few months and has yet to give up important support near $9.80-$10.00. This would be the level to watch as a break below this level may lead to a test of the $8 level.
National Semiconductor Corporation (NYSE:NSM) also has been trading sideways for several months, bouncing between the $13.00 and $15.50 levels. NSM actually fell under its base briefly a few days ago, as it dipped to $12.68. It rebounded fairly quickly from this level, but is still in danger of a breakdown. This base has been building for almost a year, and it would undoubtedly be bearish if NSM broke down from it.
Advanced Micro Devices, Inc. (NYSE:AMD) is INTC's most direct competitor in the chip space, and it has already broken down from its base. AMD had an impressive gap higher back in November of last year, and was able to follow through with a rally that more than doubled its share price. AMD then began a very long consolidation between the $7 and $10.25 levels. This base began to deteriorate this summer, as AMD began to set lower lows and lower highs. It ultimately fell under the base in August, and is currently trading sideways just under the base. The two levels to watch are $7 to see if AMD can climb back into the base and $6.26 which is marking its most recent low. A break below this level could imply a fill of the gap from last November.
The semiconductor stocks have been showing weakness over the past few months and are rapidly approaching important support levels. In fact, some of these stocks are under important levels. This group is a good indicator for gauging investor's appetite for risk and the recent weakness shouldn't be ignored. How these stocks deal with upcoming support levels would likely have important implications for the tech sector and the markets in general. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.