Semiconductor stocks have been a tear of late and will get another boost as Nvidia Corporation (NASDAQ:NVDA) came out with another positive earnings report last night after the close. The earnings news will help the stock break out to new highs along with Advanced Micro Devices, Inc. (NASDAQ:AMD) shares, which have also been forging new highs on their own.
While these stocks are breaking to new highs, shares of Chesapeake Energy Corporation (NYSE:CHK) are setting into a familiar pattern that should have the bulls worried.
Nvidia Corporation (NVDA)
Shares of Nvidia will start the day higher as the company beat earnings and hit their guidance for the next quarter. NVDA stock had pulled back above 3% in the days leading into the announcement, a last-minute pattern we like to see as it indicates that traders aren’t too comfortable with the pending announcement.
Nvidia stock has been a juggernaut over the last year, gaining 360% over the last twelve months. This morning’s break above $120 will take NVDA into new high territory again and draw the attention of momentum traders.
Nvidia stock is recommended a buy by 60% of the analysts covering the stock; however, we’re likely to see upgrades on the earnings news.
NVDA shares are also likely to break into a volatility rally this morning on a move above $121, as this will indicate that the top Bollinger band has been broken — a sign that a stock is about to go into parabolic rally mode.
With no technical resistance in its way, watch for the momentum trade to carry Nvidia into another stratosphere.
Advanced Micro Devices, Inc. (AMD)
Another company in the semiconductor space that is set to break even higher is Advanced Micro Devices. AMD’s stock is trading 621% higher over the last year as the stock has moved from lows below $2 to its current $13.55.
Advanced Mirco stock is just coming off of a volatility rally itself as the share price moved back within a “normal” distribution; however, the strength in NVDA’s earnings is likely to give AMD shares another boost.
On a cautious note, Advanced Micro shares have been in an overbought zone, suggesting that the stock could see some resistance. That said, a move to the $13-level would bring the stock out of that volatility rally mode, but would also give AMD shares a rest in order to continue their rally higher.
Hard support for Advanced Micro shares sits at $12.50, which traders trying to time a pullback entry may want to consider as a target.
Chesapeake Energy Corporation (CHK)
Our technical charts picked-up on the short-term rally that had been pending for Chesapeake Energy stock as it approached $6. There have been few stocks that have been as technically predictable as CHK, which is why we’re concerned over buying into the recent strength.
The two-day breakneck rally from $6.12 to $6.50 (about 6%) is heading right into some resistance and given the trend in Chesapeake Energy shares, it’s not going to take too much to turn the shares lower again as momentum is decidedly negative.
Our charts are honing in on the $6.50-level and the fact that the RSI for CHK is already in the middle of its range as the stock is already in the process of tiring.
The next decline turns $6 into the make-or-break level for the beleaguered energy company, a mark that will likely give way to lower prices for Chesapeake Energy and a target of $5.90.
Bottom line, the two-day rally in CHK should be looked at as a gift for those that were looking for a point to sell out of this declining pattern or a point to add short positions.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
