Semiconductor stocks have been on fire recently, with the PHLX Semiconductor Index (SOX) climbing to its highest level since 2000 last month. The index had a great first quarter — up 11.6% from start to finish — but since then it has been drifting lower. SOX is down 1.7% through the first four days of April.
As you can see in the chart below, the semiconductor index has pulled back several times since breaking out above its 50-day moving average (the blue line) in July 2016. In each instance, the index has either bounced off the indicator or fallen below it for a few days before ultimately starting a new uptrend.
SOX is about a percent from testing the 50-day as support once again, and could be ready to signal another buying opportunity within the industry.
As a result, I have several semiconductor stocks on my watch list. Further near-term weakness could indicate it’s time to buy, so let’s take a look at what exactly I’m waiting for.
Micron Technology (MU)
Micron Technology, Inc. (NASDAQ:MU) is one of the better performers within the semiconductor space, and riding the leaders is a smart strategy when a sector is in the midst of a strong uptrend.
MU gapped higher at the end of March and since then has been consolidating those gains while drifting lower. That’s positive action, and I view the stock as a good buy on a pullback to $27.
Broadcom Ltd (NASDAQ:AVGO), which was formed in a merger between Avago Technologies and Broadcom, is an all-star among semiconductor stocks. AVGO had a spectacular start to the year, and while shares didn’t gap up the way MU did, they did climb steadily to hit a high around the middle of March. They’ve been consolidating in the weeks since.
This consolidation phase has taken AVGO toward a near-term support zone around $215, and the 50-day moving average (the blue line) currently at $214 is providing additional cushion. Buying the stock near that area of support would be a high reward-to-risk setup.
Texas Instruments (TXN)
Texas Instruments Incorporated (NASDAQ:TXN) is the third and final name on my watch list. Similar to SOX, Texas Instruments climbed to its best level since 2000 in March before pulling back and consolidating at current prices near $80.
The stock has been able to hold above its 50-day moving average (the blue line), which has acted as support in the past, and I believe a buy near the indicator would be strong set-up.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.