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RF Micro Merger-TriQuint Puts Focus on Semiconductor Sector Leadership

NEW YORK (TheStreet) -- On Monday RF Micro Devices (RFMD - Get Report) announced that it plans to merge with TriQuint Semiconductor (TQNT) to form a new company with shareholders of each owning half. Both stocks surged by more than 20% on the news. 

The merged company will combine RF Micro's chip solutions for mobile communications with TriQuint's analog and mixed signal circuits for communications applications.

As this news was released, I was preparing my analysis of the Market Vectors Semiconductor ETF (SMH), which consists of 24 companies in the semiconductor industry, and this ETF has set new highs for six consecutive trading sessions.

RF Micro and TriQuint are not among the 24 stocks within this semiconductor ETF, but by crunching the numbers for the 24, investors can consider other possible mergers and acquisitions.

Year to date, nineteen components of the semiconductor ETF are higher. They are led by Skyworks Solutions (SWKS), which is up 20.4%. In second place is 3D-graphics chip provider Nvidia (NVDA), which is up 18%.

Among the five year-to-date decliners, the biggest loser is ARM Holdings (ARMH), which is down 10.2%.

The PHLX Semiconductor Index (SOX), which has 30 components, has set eight consecutive multiyear intraday highs and is up 5.3% so far in 2014. RF Micro and TriQuint are not components of the SOX.

Crunching the daily levels, the SOX has been above its 200-day simple moving average since Jan. 2, 2013. Back then, the 200-day was around 390, and today it's at 496.32. The SOX is also well above its 21-day and 50-day SMAs at 541.45 and 534.20, respectively.

The weekly chart for the SOX (563.36) is positive but overbought with its five-week modified moving average at 543.92 and its 200-week SMA at 415.05. Notice how the 200-week SMA provided a longer-term reversion to the mean since the semiconductor bubble popped in early-2000. Since then, the 200-week SMA has been tested or crossed in nine of the last 13 years.

Courtesy of MetaStock / XENITH

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RFMD $16.59 -2.07%
TQNT $71.53 6.43%
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