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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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