Aug

13

$SOX It To Them

Pete @ 1:43 PM | | Start a Discussion 

Trading Ideas for Wednesday featured 25 winners in a weak market. Seven of the day’s winners were from the semiconductor sector.

This sort of price action gives more confirmation that money is flowing into technology with Jim Cramer leading the charge:

  • Momentum in Tech?
    The market favors momentum over fundamentals right now, Cramer said during Tuesday’s edition of Mad Money at the Half. CNBC’s Bob Pisani told Cramer Tuesday that this tech momentum trade was just a short-term trend as investors look to make some money. Pisani agreed with Cramer that the U.S. dollar was going to be “a serious headwind” for tech stocks in the second half of 2008.
  • Cramer: Long Live Deflation

PHLX Semiconductor Sector Index ($SOX)

13-sox.gif
Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

In the above chart, I have marked off what technicians are watching. Points 1 and 2 showing a double bottom test and marked off the May highs as the point where the last time the bulls were enthusiastic.

Applied Materials (AMAT)

  • Applied Materials Forecasts Orders That Top Estimates
    Orders will increase between 5 percent and 10 percent in the fourth quarter, which ends in October, from the previous three months, Chief Financial Officer George Davis said today on a conference call. Orders last quarter had fallen 16 percent from the previous period.
  • Applied Materials’ earnings slide in tough market
    “I think it’s fair to say I expect capital spending to be up year-over-year in 2009,” Splinter said on the call. “As you know, the last time I said that, I really felt our third quarter was the bottom of the trough, and that we would see a modest recovery. I am sticking to that at this time.”

13-amat.gif
Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

Intel Corporation (INTC)

  • Intel Net Rises With Global Laptop Sales
    Intel Corp. reported a 25% jump in second-quarter profit, as strong world-wide demand for portable computers that use its chips outweighed a slowing U.S. economy.

13-intc.gif
Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

Xilinx, Inc. (XLNX)

13-xlnx.gif
Daily bar chart with InVivo.RMI.Stops and InVivo.RMI.Histogram applied

As we can see from the above charts, these stocks did not test their January 2008 lows during the recent major market weakness.

Will there be real money flow into the semis or will this be a false up move? We must pay attention to what the price action will be saying and how the market participants react emotionally.

As I said the other day, “The key thing to watch is this: if the broad markets pull back, will the technology sector emerge as a leader or laggard?”

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