(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Chip stocks have been battered in 2018, with the PHLX Semiconductor Index falling 14% off its highs. Some stocks are down even more, with Teradynye Inc. (TER), Maxim Integrated Products Inc. (MXIM), Marvell Technology Group Ltd. (MRVL) down by as much as 36%. Now, that momentum is shifting and these stocks could rise by 10% or more short term, technical analysis suggests.
Teradyne, which has suffered the biggest decline, hit a high price of about $50.70 in March, and since then the stock has fallen 36% to $32.30. That may change. The stock is retesting its May lows of around $32.30. Additionally, the relative strength index has been steadily trending lower since November of 2017, a bearish indication. A positive sign, though, is that the RSI is now below 20. The last time the RSI fell this low was in May, after which the stock rallied by 41%. Should Teradyne's oversold stock rebound, its first level of technical resistance comes around $36.40 an increase of 13% from its current price.
Maxim's stock has fallen 23% from its 2018 highs and is currently sitting at its lows of the year at around $51.15. The stock has tested that support level over the past ten days. Should the shares rise, they are likely to climb to resistance around $56.65 which is 11% higher than its current price. Additionally, the RSI for Maxim has also hit oversold levels, falling below 30. This indicates the stock is ready for a short-term rebound.
Marvell also looks poised to rise. It has fallen 28% from its March highs and like the others is retesting its lows on the year of around $17.50. Should shares rebound, they are likely to rise to resistance of around $19.10, an increase of 10%. The RSI for Marvell has started to trend higher since early September despite the stock price continuing to reach new lows, a bullish divergence. It would suggest that Marvell's stock price is poised to rise.
These three stocks are likely to rebound over the short-term as long as they trade above their previous lows and as long as momentum is trending higher. But a pullback in the overall tech sector could drag down these stocks, and any drop in their share prices below the current lows would be a bearish indicator.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.