3 Semiconductor Stocks to Buy

AMD, NVDA, and MU are all retreating toward support zones

semiconductor stocks - 3 Semiconductor Stocks to Buy

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The Nasdaq’s recent touch of 9,000 stole the headlines and anchored traders’ attention to the technology sector. In celebration of the achievement, we’re shopping for semiconductor stocks to buy.

The chip industry may not have single-handedly driven the tech space to record heights, but it certainly helped. Indeed, it has been a growth engine for the sector and includes many attractive names that have delivered eye-popping profits over the decade. Momentum traders love semiconductor stocks for their high volatility and tendency to score big follow-through during breakout patterns.

The Market Vectors Semiconductor ETF (NYSEARCA:SMH) is as good a proxy as any for the entire industry. It just pulled back to the rising 20-day moving average and is offering an attractive, lower-risk entry for buyers. You can buy the whole space via SMH or play individual names.

Here are three of my favorite semiconductor stocks to trade.

3 Semiconductor Stocks to Buy: Advanced Micro Devices (AMD)

Source: The thinkorswim® platform from TD Ameritrade

2019 Gain: 148%

A glance at last year’s gain quickly reveals just how meteoric the ascent in Advanced Micro Devices (NASDAQ:AMD) shares has been. The momentum pushed into 2020 with a tasty 8% rally to begin the new year. AMD stock’s moving averages are all rising in bullish fashion.

At the same time, the volume indicator is littered with accumulation days, confirming institutions are supporting the ascent. With AMD some 10% over the 20-day moving average, it is hard to recommend new longs here. Some backing and filling or a retreat toward $45 would provide a much more attractive entry point.

If you’re unwilling to wait for a better setup, then short puts are my best idea. That way, you get paid to buy the stock at a discount if it falls from here.

The Trade: Sell the February $41 puts for around $1.15.

Micron (MU)

Source: The thinkorswim® platform from TD Ameritrade

2019 Gain: 69%

Though Micron’s (NASDAQ:MU) performance last year lacks the jaw-dropping gains of AMD, it still marked a strong turnaround after 2018’s dismal 50% drop from its peak. December was a particularly strong month for MU stock, ending with a robust rally accompanied by many accumulation days.

The earnings announcement saw good enough numbers to keep the uptrend alive as well. With that uncertain event now in the rearview mirror, traders can swing away with the chart as their guide.

Over the past two sessions, MU stock has retreated to its rising 20-day moving average to create a lower-risk entry. If you think it can remain above $50, then bull put spreads are worth a shot.

The Trade: Sell the February $50/$45 bull put spread for around 85 cents.

Nvidia (NVDA)

Source: The thinkorswim® platform from TD Ameritrade

2019 Gain: 73%

Nvidia (NASDAQ:NVDA) fans finally got something to cheer about during the fourth quarter. After spending the first eight months of the year building a base and finding its footing after 2018’s death drop, NVDA stock finally reclaimed some of its lost magic.

The uptrend that has since formed has turned the 20-day, 50-day, and 200-day moving averages higher. Bulls are now very much back in control across all time frames. Like its predecessors, NVDA shares fell over the past two sessions but are rallying back as I type. I suspect this is another in a long line of buyable dips.

Implied volatility has picked up over the last few weeks, re-inflating what were otherwise small premiums. If you think NVDA can stay above $215 through February expiration then sell bull put spreads

The Trade: Sell the February $215/$210 bull put spread for around $1.05.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here


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