Cypress Semiconductor: Make a Calculated Play on CY Stock

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Shares of Cypress Semiconductor Corporation (NASDAQ:CY) rallied meaningfully to start the month of March on Monday as the Nasdaq Composite closed above the 5,000 mark. CY stock as a result moved out of a multimonth consolidation phase to the upside and now looks to have enough momentum to continue its ascent.

beat the bell stock investing adviceI often point to the fact that most stocks are highly correlated to one another, which is to say that if the broader market rises or falls 1% on any given day, chances are that 70% to 80% of stocks also move in that direction. This makes sense intuitively and mathematically, yet many traders almost entirely focus on the idiosyncratic story on any given stock rather than the probability of it moving in any given direction of the broader market.

Some areas of the stock market, like parts of the technology sector, see even higher correlation among its stocks and to certain broader market indices, and semiconductor stocks seem to fall into that category.

Enter Cypress Semiconductor.

CY Stock Charts

Looking at the multiyear weekly chart of CY stock, we see that after a prolonged sideways shuffle from summer 2012 until December 2014, Cypress Semiconductor finally cleared past the upper resistance line, but then quickly settled into a multimonth consolidation phase. Also note that last October, CY stock briefly dipped below the lower support line, only to quickly reverse gears and push higher violently.

The October lows can thus be marked as capitulatory in nature and give further credibility to the ensuing breakout from last December. Stocks that break past multiyear resistance points, consolidate above this resistance and resume the move higher are doing something right — so we should take heart in seeing CY stock do just that.

cy stock charts weekly cypress semiconductor
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On the daily chart, an important component of the December breakout move was the breakaway gap from Dec. 2, which accelerated the stock higher after a sleepy few months. By late January CY stock had topped out and began to trade in a choppy but necessary consolidation move. The consolidation phase allowed Cypress’ 50-day simple moving average to catch up with price, which with Monday’s 4.4% rally pushed past a diagonal resistance line, closing at a fresh multiyear high.

From a momentum perspective, CY stock now looks to be well-positioned to extend this rally in coming weeks.

cy stock charts daily cypress semiconductor
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Active investors could consider buying the stock above the $15 area for a move toward $16.50-$17, while any major reversal of Monday’s gains would quickly negate the immediate setup.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/cypress-semiconductor-corporation-cy-stock/.

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