Editor’s Note: Sam Collins will be on vacation through June 25. Filling in for him are two other top technical analysts, Chris Johnson and Jon Lewis.
Novellus Systems, Inc. (NASDAQ: NVLS) — One of the technical signals we look for in bullish plays is shorter-term moving averages crossing above longer moving averages. Such crossovers indicate sustained strength in a stock that has more upside.
Yes, you’ve missed part of the move higher, but who can time the exact bottom for a stock? And who will complain with profits from a momentum play?
That’s what we’re seeing now with semiconductor equipment maker Novellus. Actually, the stock has been on a huge run for the past 19 months, gaining more than 170% off a November 2008 low. For comparison, the Nasdaq (NASD) is up about 76% in that same time period.
There are a couple of things we like about NVLS’ chart. The first is a bullish crossover of the 20-day and 50-day moving averages. Note in the chart below how the stock performed after the last such crossover.
The second is the support the shares are getting at the $28 level. Note how this mark defined a top in April. Such resistance points often become support once a stock breaks above them.
As for the rally getting tired, the stock is not in overbought territory. And don’t forget that NVLS topped out around $70 in early 2000. So there’s plenty of upside room to run, despite the length and distance of the current rally.
Look for the shares to continue their methodical climb. Given its history, this is a longer-term play that could see the stock move to $35, the late 2006 high and one-half of the all-time high.
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