Weakness in consumer spending has been one of the drags on these LED stocks, which tend to trade as a momentum stock basket. The LED stocks are viewed as being highly correlated with sales in the PC display and LCD TV market. With investor sentiment recently negative on spending, all it took was signs of life from the consumer to give these stocks a little bit of a push up. On Tuesday, there were several data points related to consumer spending that were not as bad as many investors had feared.

Retail sales data, in fact, pushed the broader equity markets higher on Tuesday. In particular, Best Buy ( BBY) put up better sales numbers than expected for August and surged ahead by more than 6%. While the LCD TV sales numbers from Best Buy weren't great, in the opinion of LED stock analyst Andy Abrams of Avian Securities, the numbers were less bad than the market expected.

Similarly, Corning ( GLW) lowered its volume guidance for the display market this week, but guided the Street lower to an extent that was not nearly as bad as the worst fears. Corning shares were also outpacing the market gains on Tuesday, even as the Street was lowering estimates, with Corning shares up close to 5%.

"Corning's numbers were not as bad as they could have been and the same was true of Best Buy. Investor sentiment overshoots, we had a little bit of an overreaction last week, and so the LED stocks are getting some opportunity back today," Avian Securities' Abrams said.

Abrams downgrade of Veeco and Aixtron to a hold last week was one of the negative news flashes that sunk these LED stocks, and that slump persisted for all of last week.

While the bleeding ended on Tuesday -- and even on Monday these LED stocks had stanched the bleeding, even if gains were minor -- many analysts that cover the LED stocks remain convinced that the stocks are still in a short-term negative window within a longer-term bull scenario. Just because retail sales were better in August than the worst case scenario doesn't mean that the market is overly confident about the upcoming holiday season. An investor could make the case, and the bet, that the holiday season will be better than the dire predictions and therefore, these beaten-down stocks present a quick profit opportunity.

However, the trading volume in Tuesday's rally didn't offer support for that argument. There may have been some short-covering on the better than expected retail sales news that was part of the Tuesday rally in LED stocks.

If you liked this article you might like

Market Rally Fades as Dow, S&P 500 and Nasdaq Finish Lower

Wall Street Holds Lower as Consumer, Defense Names Decline

Cree Lights Up for a Breakout

Analysts' Actions -- Arconic, Big Lots, Chipotle, Snap and More