Novellus Systems (NASDAQ: NVLS) — On Nov. 11, with the stock trading at $29, the Trade of the Day said, “This maker of equipment used in the fabrication of integrated circuits broke from a compound top late last month with a trading target of $33.”
On Friday, our target and the annual targets of Credit Suisse and S&P, both at $35, were exceeded in a stampede to buy chip stocks despite S&P’s appraisal that their “risk assessment reflects the historical cyclicality of the industry.”
This pop offers readers who bought NVLS a great opportunity to cash in on a nice profit. Spikes like those seen in the semiconductor sector often occur when there is relatively low volume in the overall market and few sellers.
At the very least, NVLS holders should sell calls, buy puts, enter trailing stops, or take other defensive actions since it is likely that the stock will become a better value later this year.
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