The semiconductor sector has come back to life after many companies within the group have provided positive earnings reports within the last two weeks. There’s more to be had though as we’ll see eight semiconductor stocks announce reports this week followed by another 10 the following week.
Today’s three big stock charts review the price actions of Intel Corporation (NASDAQ:INTC), Cypress Semiconductor Corporation (NASDAQ:CY) and Marvell Technology Group Ltd. (NASDAQ:MRVL); three companies that are currently being swept away by the earnings-driven technical rally in the semiconductor stocks.
Intel Corporation (INTC)
For once, Intel is starting to come back into favor with the technical traders after a positive earnings season. The response to INTC’s report is contrary to what we’ve become used to as traders have often “sold the news,” regardless of the company’s results. Now, this old guard icon of the semiconductors is looking like a new-age player.
- INTC is finally breaking a long trend of breaking down after its earnings reports as the company’s fundamentals are finally pointing toward a strong outlook.
- The strong two day move after earnings has Intel shares deep into technically overbought territory, which our models indicate sill results in some short-term weakness for INTC stock.
- Intermediate-term bulls and traders should eye the $43-level as a “buy the dip” price as the stock will run into technical strength based on the volume patterns we’ve noted over the last two trading days.
Marvell Technology Group Ltd. (MRVL)
Marvell Technology shares have backed themselves into a technical breakout situation as the company lines-up for an earnings announcement in two weeks.
We love to see a stock pull back to technical support ahead of earnings as it suggests that the traders have opened up room for a post-earnings rally. This may be what is building for MRVL.
- Shares of Marvell Technology have been lagging the rest of the semiconductor sector over the past few weeks as they continue to trade in a range. The lack of buying ahead of the Nov. 16 earnings report is healthy as it maintains a low expectation for the report.
- The $18 price will provide some lower range support for Marvell, not only from a round-numbered perspective, but also from the rising 50-day moving average that is currently sitting at $17.94.
- MRVL shares are far from overvalued from a technical perspective as the RSI is now reading 58. Our experience, including this earnings season, is that companies with RSI readings above 70 have almost always seen a “sell the rumor” move after earnings. There is overhead room for MRVL shares to run after earnings.
Cypress Semiconductor Corporation (CY)
Cypress Semiconductor got a boost from its earnings report last week, putting it in position for a volatility rally that is likely to move CY shares north of $17 in the short-term. Is it too late to grab this semiconductor shooting star?
The charts say “no.”
- Recent support at the 10-month moving average has attracted trading volume on the buy side, indicating that longer-term investors are taking note of Cypress’ breakout. This has strengthened the momentum indicators, suggesting that a $20 target is reasonable for CY stock.
- Short interest on Cypress Semiconductor stock is above 7 times the average daily volume. This identifies a high likelihood that the company will experience a short covering rally that will propel CY shares higher.
- Cypress shares are breaking above their top Bollinger Band for the second consecutive trading day. This indicates a growing volatility rally. This volatility rally will conveniently also trigger the short covering rally in CY stock.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.