Buy Rated Semiconductors Lag the SOX

NEW YORK (TheStreet) - The PHLX Semiconductor Index has been a stock market leader setting a multi-year intra-day high at 518.97 on Dec. 9 tracking the tech-heavy Nasdaq higher. Could it be that demand for semiconductors is on the rise despite a decline in the shipments in personal computers? Since almost every device manufactured contains computer chips strength in semiconductor stocks can be considered a leading indicator for a stronger than expected economy. In the case of the stocks in the SOX is it also a story where a rising tide of market strength does not lift all boats. Among the 15 buy rated stocks of the 30 in the SOX five are trading below their 200-day Simple moving averages including Altera (ALTR), Cree (CREE), Maxim Integrated (MXIM) and Taiwan Semi (TSM).

The SOX has a positive but overbought weekly chart profile with its five-week modified moving average at 506.67 and a 12x3x3 weekly slow stochastic reading of 92.27, well above the 80.00 reading that identifies an overbought condition. Semiconductors are also in the computer and technology sector which is 30.2% overvalued but with an overweight sector weighting as 51.7% of the 1140 companies in the sector are rated buy or strong buy.

Among the 15 stocks in today's post, two are undervalued by 3.7% and 31.6%. Among the overvalued names nine are overvalued by 20.8% to 43.9%. Two stocks in today's post have losses of 2.1% and 5.1% over the last 12 months, while eight of the remaining stocks are up between 24.5% and 73.6% over the last 12 months. The reversion to the mean is mixed as five are below their 200-day SMAs while 10 are above.

Analog Devices (ADI) ($48.91) is 38.8% overvalued and has a gain of 18.1% over the last 12 months and is above its 200-day SMA at $46.84. The stock traded as high as $50.79 on Nov. 15 and as low as $46.12 on Nov. 27. My monthly value level is $47.61 with semiannual and quarterly risky levels at $51.19, $52.45 and $53.36.

Altera ($31.41) is 19.3% overvalued and has a loss of 2.1% over the last 12 months and is below its 200-day SMA at $34.32 with its recent low at $30.99 set on Nov. 19. My annual value level is $27.26 with monthly and annual pivots at $32.14 and $32.26 and a quarterly risky level at $40.01.

Applied Materials (AMAT) ($16.83) is 33.5% overvalued and has a gain of 52.3% over the last 12 months and is above its 200-day SMA at $15.61 but below its 50-day SMA at $17.51. My semiannual value levels are $14.88 and $14.87 with a quarterly pivot at $16.46 and monthly risky level at $18.95.

Advanced Micro Devices (AMD) ($3.72) is 31.6% undervalued and has a gain of 60.3% over the last 12 months and is above its 200-day SMA at $3.49 after trading down from $4.13 on Oct. 17 to $3.04 on Oct. 23. My weekly value level is $3.11 with a quarterly pivot at $3.62 and monthly risky level at $4.64.

Cree ($58.18) is 21.5% overvalued and has gained 73.6% over the last 12 months and is below its 200-day SMA at $60.43 with its 50-day SMA at $62.47 after trading as low as $52.85 on Nov. 20. My annual value level is $49.93 with a quarterly pivot at $57.96 and a semiannual risky level at $65.10.

KLA-Tencor (KLAC) ($62.37) is 43.9% overvalued and has a gain of 31.5% over the last 12 months and is above its 200-day SMA at $57.88 but below its 50-day SMA at $63.11. My semiannual value level is $60.30 with a semiannual pivot at $63.61 and monthly and quarterly risky levels at $65.98 and $67.84.

LAM Research (LRCX) ($51.59) is 17% overvalued and has a gain of 43.1% over the last 12 months and is above its 200-day SMA at $47.83 but below its 50-day SMA at $52.47. Quarterly and annual value levels are $45.46 and $44.12 with an annual pivot at $49.11 and semiannual risky levels at $56.87 and $57.51.

LSI Logic (LSI) ($8.13) is 24.3% undervalued and has a gain of 15.3% over the last 12 months and is above its 50-day and 200-day SMAs at $8.01 and $7.38 after setting a 2013 high at $8.53 on Oct. 31. My annual value level is $7.34 with a semiannual pivot at $8.19 and monthly, semiannual and quarterly risky levels at $8.49, $8.89 and $9.16.

Maxim Integrated Products ($28.26) is 5.6% overvalued and has a loss of 5.1% over the last 12 months and is below its 50-day and 200-day SMAs at $29.16 and $29.62. My monthly value level is $25.39 with quarterly and semiannual risky levels at $33.64 and $33.84.

Nvidia Corp (NVDA) ($15.56) is 20.8% overvalued and has a gain of 25.9% over the last 12 months and is above its 200-day SMA at $14.44 and on the cusp of its 50-day SMA at $15.48 after setting a trading range between $14.52 on Nov. 7 and $16.32 on Nov. 14. My quarterly pivot is $15.64 with monthly and semiannual risky levels at $16.82 and $17.21.

ON Semiconductor (ONNN) ($7.48) is 0.9% overvalued and has a gain of 10.5% over the last 12 months and is between its 50-day and 200-day SMAs at $7.14 and $7.70. My monthly value level is $6.95 with annual and quarterly pivots at $7.60 and $7.94 and semiannual and annual risky levels at $9.49 and $10.10.

Sandisk (SNDK) ($68.96) is 29.3% overvalued and has a gain of 61.2% over the last 12 months and is above its 50-day and 200-day SMAs at $66.98 and $59.66 with a recent high at $70.93 on Oct. 29. My monthly value level is $66.85 with a semiannual risky level at $72.05.

Teradyne (TER) ($17.03) is 33.1% overvalued and has a gain of 4.3% over the last 12 months and is above its 50-day and 200-day SMAs at $16.88 and $16.67 with a recent high at $17.90 on Oct. 30. My quarterly value level is $15.65 with a monthly pivot at $17.53 and quarterly and semiannual risky levels at $20.66, $21.62 and $22.08.

Taiwan Semiconductor ($17.37) is 3.7% undervalued and has a gain of 2.9% over the last 12 months and is below its 50-day and 200-day SMAs at $17.91 and $17.77 with a recent low $16.86 on Nov. 21. My annual value level is $15.93 semiannual risky levels at $18.35 and $18.82.

Xilinx (XLNX) ($43.67) is 26.3% overvalued and has a gain of 24.5% over the last 12 months and is above its 200-day SMA at $42.12 and below its 50-day SMA at $45.07. My weekly value level is $41.79 with a semiannual pivot at $43.81 and semiannual risky level at $45.42.

At the time of publication the author held no positions in any of the stocks mentioned.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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