With some easing trade war hostilities and Wall Street cozying up to a “Fed Put,” it’s time to park a bit of speculative cash in three semiconductor stocks that are shaping up for so strength in the weeks and months ahead.
The sky is falling shtick from May and a bit of early June gloom in the broader market have been quickly lifted courtesy of averted tariffs with Mexico and optimism that the Federal Reserve is ready to indulge bulls with “prophylactic rate cuts” if Wall Street can’t find the wherewithal to right itself up on its own.
Of course there are no guarantees a bearish U-turn won’t rear its ugly head again. There are still the trade war negotiations with China later this month. And despite investors’ conviction, any confirmation of a Fed Put is still a week out when the FOMC holds its next two-day meeting.
Nevertheless, under the basic assumption that 2019’s bull market has been resuscitated with the promising price action of the past few days, investors that want additional market exposure tied to these positive developments should consider semiconductor outfits with ties to autonomous vehicles.
The three driverless stocks to buy are Nvidia (NASDAQ:NVDA), NXP Semiconductors (NASDAQ:NXPI) and Ambarella (NASDAQ:AMBA). With decent entry points on the price charts and using well-placed, human-engineered exit strategies, investors can feel more confident about driving healthier returns into their portfolios.
Nvidia (NVDA)
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Nvidia is the first of our semiconductor stocks to buy today. Straight from the horse’s mouth, “NVIDIA uses the power of AI and deep learning to deliver a breakthrough end-to-end solution for autonomous driving — from data collection, model training, and testing in simulation to the deployment of smart, safe, self-driving cars.” I couldn’t have said it any better myself.
On the price chart, NVDA stock is looking set to zip higher. Technically, shares have formed and confirmed a two-week reversal pattern that could be the beginning of a new uptrend.
This candlestick signal for going long Nvidia is backed by an oversold stochastics signal. It also enjoys key zone support from its ten-year, 50% Fibonacci cycle, 200-week simple moving average and 76% retracement level tied to the market’s ubiquitous December bottom.
Buy Strategy: NVDA stock is ready for purchase today. And while shares of this driverless stock can be volatile, smallish exposure of 7% also looks like enough leeway within the two-week bottoming pivot to abort the position if necessary.
NXP Semiconductors (NXPI)
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NXP Semiconductor’s claim to fame within the driverless universe is that it’s the world’s largest automotive chipmaker by sales and has an autonomous driving platform called BlueBox. BlueBox allows automakers to convert traditional cars into driverless vehicles with an onboard computer.
Technically, shares of this driverless stock look very attractive after pulling back over the last month. NXPI stock has managed to find support at the 50% retracement level tied to its December low, as well as the share’s 200-day simple moving average.
With the December bottom also finding support at its life-time 50% Fibonacci level and forming a nice monthly chart up-channel in the process, along with stochastics trending higher, NXPI stock looks positioned for buying today.
Buy Strategy: Buy NXPI stock and use the low of the monthly pullback as an initial stop-loss to keep technical and dollar exposure at acceptable levels. On the upside, use this driverless stock’s all-time-high and channel resistance (roughly $125 – $132) for a profit-taking target.
Ambarella (AMBA)
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Ambarella’s past reliance on chip sales to action camera outfit GoPro (NASDAQ:GPRO) was both a boon and a bust.
But it’s time to let bygones be bygones. Ambarella is now using its chip expertise to tackle the autonomous automobile market. The company’s camera sensors and processors are being used for computer vision, driver assistance cameras, in-car cameras as well as parking assistance technology.
Ambarella has its detractors. Shares do maintain short interest of around 16%. And Ambarella’s latest quarterly results do suggest the company still has a long road in front of it.
Nevertheless, with its computer vision (CV) technology a potential huge windfall and shares recently completing a three-year long double bottom pattern more than 70% removed from its GoPro-driven halcyon highs, I do see the opportunity for putting AMBA stock on the radar for buying.
Buy Strategy: My recommendation in AMBA stock is to buy shares above $45. That’s currently 8.5% above Monday’s closing print. The idea is to avoid potential one- or two-day short squeezes and only buy on strength hinting the bears may be overstaying their welcome as a more successful next chapter in Ambarella looks to unfold.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
