Semiconductors Showing Signs Of Strength

By Joey Fundora | December 19, 2009 AAA

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.

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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.

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