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Sector Watch: Semiconductors
By Peter S. Iuvara
The semiconductor sector, as always, has provided an interesting
and turbulent "roller-coaster" like ride over the
past year. With a 52-Week high of 1175.17 and a 52-Week low
of 453.85, I sure hope investors have had their seatbelts
fastened! But, amazingly enough, the index is up 3.1% thus
far year-to-date.
So, the question that begs to be answered … where will
the semis go from here?
When taking a look at the chart to the right, two interesting
near term conditions should jump off the page.
The first and most current would be the trading range (circled
in red) we have established over the past few weeks. The chart
looks to be consolidating in an effort to establish a base.
The range is quite tight and tested just around the unchanged
year-to-date levels. If the index can hold these levels (which
they are), and more importantly break through the 5 - 7% year-to-date
gain range, then an up-trending condition should immediately
begin.
The other interesting event is the double-top (red line)
which occurred from the middle of May to the end of June.
This 20 - 22% year-to-date gain is an extremely important
near-term resistance level. If the index makes the upside
move, it will be interesting to see what happens around these
levels. Obviously, it would be bullish if the index could
break through those levels.
Overall, quite a few semiconductor companies and chipmakers
have received upgrades recently and some have given optimistic
guidance regarding future sales. With the semiconductors being
both a volatile and cyclical sector, we expect this index
(and a handful of associated stocks) to make a profitable
upside move in the very near future, as orders and the "usual"
business cycle of the sector begins to form a growth pattern.
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