The stock rally is broadening. Buyers are once again spilling into the tech space with an emphasis on snatching up semiconductor stocks. What’s particularly compelling about the semiconductor industry is the beautiful base that is being broken as I type.
The Vaneck Market Vectors Semiconductor ETF (NYSEARCA:SMH) has consolidated for the past six weeks in bullish fashion. Sideways congestion following a significant price rise is always a welcome development. The churn allows profit-takers to exit with grace while new buyers pile in to keep prices afloat.
What’s more, sideways bases work off overbought conditions while building a solid foundation for prices to launch from during their next advance. If this week’s bullish action in the SMH ETF is any indication, the next semiconductor stock rally is upon us.
Behold, three semiconductor stocks on the move.
3 Semiconductor Stocks on the Move: Texas Instruments (TXN)
Texas Instruments Incorporated (NASDAQ:TXN) kicks us off with a textbook breakout setup. Since soaring in late July on solid earnings, TXN stock has built one heck of a multimonth base. Resistance finally caved on Friday. And that’s about as bullish an omen as shareholders could have hoped for.
While the breakout didn’t notch a new all-time high, it did usher TXN stock to levels not seen since the final days of the dot-com bubble. For all but the oldest of traders, a 16-year high might as well be an all-time high. It certainly carries similar psychological power.
With resistance fading in the background and a solid multimonth base looming beneath, now is as good a time as any to grab Texas Instruments’ call options. Buy the Jan $72.50 call for around $2.90 to capitalize on continued strength into year-end.
3 Semiconductor Stocks on the Move: Applied Materials (AMAT)
Applied Materials, Inc. (NASDAQ:AMAT) is following in the footsteps of TXN. Literally. The charts are virtually identical, providing a clear illustration of sector sympathy — that is, similar companies in an industry tend to be hated or loved by the Street in tandem. So it comes as no surprise that AMAT stock is also breaking out of a multimonth base.
And, yes, it too is scoring a new 16-year high. With little by way of near-term resistance, the future looks bright for AMAT — particularly if performance chasers continue to scurry into the stock throughout the holidays.
Buy the Jan $31 calls for around $1.35.
3 Semiconductor Stocks on the Move: Qualcomm (QCOM)
Qualcomm, Inc. (NASDAQ:QCOM) rounds out today’s trio with a bit of variation. Instead of a breakout, QCOM stock is boasting an attractive dip-buying opportunity.
Qualcomm is nestled close to its rising 50-day moving average and has been drifting sideways for two weeks. All she needs is a bit of accumulation to kick off the next advance.
Provided shares remain above the $64 level, the current dip looks buyable. I’d wait for a break of $67.70 to signal the next rally has begun. The prior resistance near $72 would be a logical target for short-term traders.
Buy the Jan $65 call for around $3.30.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
