The tech-heavy Nasdaq declined 4% in the first two weeks of October. And with earnings season upon us, tech stocks will be volatile in the wake of their earnings reports. If you need proof, take a look at the action in Advanced Micro Devices ( AMD) and Apple Computer ( AAPL) following their earnings reports last week.It's a tough market environment with negative weekly chart profiles for both the Nasdaq and Philadelphia Semiconductor Index (SOX). The weekly chart profile for the Nasdaq stays negative with a weekly close below its five-week modified moving average at 2119. The SOX stays negative on a close this week below its five-week modified moving average at 461.60. The April low for the Nasdaq is support at 1890, and the key level for the SOX to hold is its 200-week simple moving average at 422.85. Even so, my model shows that technology remains the cheapest sector, at 13.9% undervalued. This all sets the stage for earnings after the close on Tuesday from Intel ( INTC), Motorola ( MOT) and Yahoo! ( YHOO). Intel is expected to report EPS of 33 cents. Last week, two Wall Street analysts battled it out over Intel, with Prudential downgrading the stock, and upgrading AMD following AMD's earnings report, while Merrill was bold enough to recommend Intel as a buy on Thursday, ahead of earnings. I agree with Merrill. At Friday's close of $21.19, AMD was still 20.2% overvalued, while Intel was 23.8% undervalued, making fair value $30.47. Intel's weekly chart profile is negative but oversold, and a weekly close above its five-week modified moving average at $24.69 would be positive, signaling Merrill as right and Prudential wrong. On a negative reaction to earnings, Intel can trade as low as my semiannual value level at $19.90, which is where longer-term investors should add to positions. A positive reaction to earnings will put shares above my quarterly pivot at $23.34. A weekly close above $24.69 targets my monthly risky levels at $26.32 and $27.75.
Motorola is expected to report EPS of 28 cents. I have been profiling Motorola in recent Tuesday Tech Trading Diaries, and Motorola is currently 5.6% overvalued with fair value at $19.09. The weekly chart profile remains negative with the five-week modified moving average at $21.52, confirming that the 52-week high of $23.99 set on Sept. 15 will be difficult to challenge over the next three to five weeks. My monthly and semiannual value levels are $18.90 and $18.50 with an annual pivot at $20.00, a monthly pivot at $21.75 and quarterly risky levels at $23.55 and $23.80, below that 52-week high. I have been battling positive stories on Motorola in Barron's recently. Rather than rehash that battle, all I can say at this point is that my model is indicating that taking out $24 will be extremely difficult for the rest of 2005, which would be shy of the implied targets from these two articles at $25 and the mid- to high-$20s. Yahoo! is expected to report EPS of 14 cents. This stock is 26.2% undervalued, making fair value $45.44. Yahoo! has a neutral weekly chart profile, and a close this week above the five-week modified moving average at $33.70 shifts the weekly chart profile to positive. Investors should consider buying Yahoo! on weakness to my monthly value level at $30.82. I show monthly and semiannual pivots at $32.98 and $35.93 with quarterly risky levels at $44.73 and $46.96.