With last Friday’s strong close to the week (which did, however, come on notably weak volume), several groups of stocks are looking decidedly more bullish than bearish again for the near-term.
Click to Enlarge The semiconductors as measured by the Semiconductors ETF (SMH) is one such group showing good strength. The group is higher by roughly 5.50% over the past nine trading sessions and from a price action point of view not showing any willingness to stop this ramp just yet.
KLA-Tencor Corporation (KLAC), which manufactures yield management and process monitoring systems for the semiconductor industry too is working steadily higher. The stock has a clearly-defined up-trend dating back to the early 2009 lows, which consistently, with every correction swing gets tested. As you can see in the first daily chart, the latest test came in November 2012, just before the broader stock market staged its big rally in to present day.
Click to Enlarge Looking back to November 2012, I see two distinct swings that keep the stock in a bullish posture. First, the November 2012 to January 2013 rally retraced exactly 50% by April, where it found solid support to move higher for a re-test of the January highs. This swing higher is still not yet resolved, i.e has more upside. Second, the smaller swing that followed from the April lows to the June highs also retraced 50% when it found its June bottom. This swing higher too isn’t resolved, and both the larger and the smaller swings have resistance at the same spot of around $57.20. A push above this area on a daily closing basis should lead to a quick move toward the $60 area.
Very near-term, as you can see in the second chart, last Friday’s rally took the stock past a mini-resistance area of the past seven trading sessions and thus opens the gates toward resistance at $57.20 and likely beyond.