The semiconductor group has been perking up again recently, after taking a much needed breather over the past several months. This group was one of the best performing sectors earlier this year along with other technology stocks. This is an important group to watch as these stocks are critical to the health of the "New World" economy.

IN PICTURES: 7 Tools Of The Trade

The Semiconductor HOLDRs (NYSE:SMH) ETF is a good proxy following the group as a whole. SMH had a nice rally after a gap higher in July. After settling into a lateral consolidation, SMH threatened to roll over in November but was quickly met with buyers. It was able to clear the base it had been building in early December and has been trading in a tight range since then. It has held over the base and could follow through on the breakout with a move above $27.40.

Source: StockCharts.com

Microchip Technology Incorporated (Nasdaq:MCHP) is an individual stock in the group that has also been able to clear a base. MCHP broke out in early December and appears to be in the process of pulling back to test the breakout area as support. The two levels to watch are the breakout area near $27 (to see if it can hold a possible pullback), and the recent high just above $29. (For more, see The Anatomy Of Trading Breakouts.)

Source: StockCharts.com

Cypress Semiconductor Corporation (NYSE:CY) is a semiconductor stock that hasn't cleared its base, but still looks promising. CY has been stuck in a wide consolidation for the past six months, but did clear a trendline recently that coincided with recent rally attempts. A move above $10.90 is worth paying attention to, as it could lead to a full-fledged breakout above the entire base.

Source: StockCharts.com

Altera Corporation (Nasdaq:ALTR) is an interesting stock in this group due to the orderly base and break pattern it has been following. Notice how ALTR has been settling into short consolidations followed by a breakout that ends in another consolidation. While the day-to-day action can get choppy, also notice how the 20- and 50-day moving averages have been trending steadily higher. ALTR just cleared its recent base on a gap, and is holding above this area while trading in a tight range. Keep an eye on the recent high near $23 as a move above this area could lead to a decent rally.

Source: StockCharts.com

There are many other semiconductor stocks acting well recently, such as Advanced Micro Devices Inc. (NYSE:AMD) and Rambus Inc. (Nasdaq:RMBS). With many stocks already above recent bases, it is possible that the semiconductors are in the process of a sector-wide rally. This is an important sector to track, and as long as this group is leading the way higher, the market should remain relatively healthy. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  2. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  3. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  4. Chart Advisor

    These 3 ETFs Suggest Commodities Are Headed Lower (COMT,CCX,DBC)

    The charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.
  5. Trading Strategies

    4 ETFs To Trade the Russian Ruble (RSX, ERUS)

    Discover which exchange-traded funds (ETFs) provide investors with the greatest exposure to the Russian ruble and learn about the risks that come with each.
  6. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  7. Chart Advisor

    Stocks With More Upside Due to Bear Traps (TAP, SPY)

    A bear trap is a pattern that typically leads to at least a short-term rise in prices. Here are stocks exhibiting the pattern.
  8. Products and Investments

    Are Dividend Stocks a Good Substitute for Bonds?

    Are dividend paying stocks a good substitute for bonds in a low interest rate environment?
  9. Mutual Funds & ETFs

    When Is the Right Time to Change From Mutual Funds to ETFs

    Find out how to determine when it's the right time for you to switch from mutual funds to ETFs, including the benefits of ETFs and who they are best for.
  10. Investing Basics

    An Introduction To Structured Products

    Structured products take a traditional security and replace its usual payment features with a non-traditional payoff.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center