How to Trade 5 Semiconductor Stocks

Demand for semiconductors is an important economic tell, as almost every appliance and handheld device contains computer chips. Weakness in semiconductor stocks has been providing economic warnings since the PHLX Semiconductor Index peaked on June 1, 2015.

Intel (INTC) , Qualcomm (QCOM) , Micron (MU) , Skyworks (SWKS) and Texas Instruments (TXN) are components of the semiconductor index, also known as the SOX. All but Texas Instruments are in bear market territory, and all five have already reported their quarterly earnings reports.

Here's a scorecard for the SOX and these five components.

 

The weekly charts are mixed. The red line through the weekly price bars is the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average, considered the "reversion to the mean." The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicate overbought and readings below 20.00 indicate oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00.

Here's the weekly chart for Intel.


Courtesy of MetaStock Xenith

Intel had a close of $29.04 on Friday, down 15.7% year to date and in bear market territory. It is 23.4% below its multiyear high of $37.90, set on Dec. 5, 2014. The stock set its 2016 low of $28.52 on Feb. 3.

The weekly chart is negative, with the stock below its key weekly moving average of $31.38, but above its 200-week simple moving average of $27.76, which is considered the longer-term reversion to the mean. The weekly momentum reading ended last week at 26.92, down from 32.56 on Jan. 29.

Investors looking to buy Intel should place a good-till-canceled limit order to purchase the stock if it drops to $28.47 and $24.92, which are key levels on technical charts until the end of February and until the end of 2016, respectively.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $34.41, which is a key level on technical charts until the end of June.

Here's the daily chart for Micron.


Courtesy of MetaStock Xenith

Micron had a close of $11.00 on Friday, down 22.3% year to date. It is in bear market territory, 69.9% below its multiyear high of $36.59 set on Dec. 8, 2014. The stock set its 2016 low of $9.31 on Jan. 10, the same day as the low for the SOX.

The weekly chart is negative but oversold, with the stock below its key weekly moving average of $12.52 and well below its 200-week simple moving average of $18.41. The weekly momentum reading ended last week is at 15.53, up from 12.16 on Jan. 29, with both readings below the oversold threshold of 20.00.

Investors looking to buy Micron should place a good-till-canceled limit order to purchase the stock if it drops to $9.96, which is a key level on technical charts until the end of this week.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $19.18, which is a key level on technical charts until the end of 2016.

Here's the weekly chart for Qualcomm.


Courtesy of MetaStock Xenith

Qualcomm had a close of $44.02 on Friday, down 11.9% year to date. It is in bear market territory, 46.3% below its multiyear high of $81.97, set on July 23, 2014. The stock set its 2016 low of $42.88 on Feb. 2.

The weekly chart is negative but oversold, with the stock below its key weekly moving average of $47.29, and well below its 200-week simple moving average of $66.25. The weekly momentum reading ended last week at 14.81, up from 13.69 on Jan. 29, with both readings below the oversold threshold of 20.00.

Investors looking to buy Qualcomm should place a good-till-canceled limit order to purchase the stock if it drops to $42.08 and $38.38, which are key levels on technical charts until the end of this week, and the end of February, respectively.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $57.49, which is a key level on technical charts until the end of March.

Here's the weekly chart for Skyworks.


Courtesy of MetaStock Xenith

Skyworks had a close of $62.16 on Friday, down 19.1% year to date. It is in bear market territory, 44.9% below its all-time high of $112.88, set on June 19, 2015. The stock set its 2016 low of $58.50 on Jan. 20, the same day that the SOX bottomed.

The weekly chart is neutral, with the stock below its key weekly moving average of $69.96 and above its 200-week simple moving average of $48.69. The weekly momentum reading ended last week at 22.01, up from 20.46 on Jan. 29, with both readings just above the oversold threshold of 20.00.

Investors looking to buy Skyworks should place a good-till-canceled limit order to purchase the stock if it drops to $56.48, which is a key level on technical charts until the end of February.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $67.01, which is a key level on technical charts until the end of 2016.

Here's the weekly chart for Texas Instruments.


Courtesy of MetaStock Xenith

Texas Instruments had a close of $49.88 on Friday, down 9% year to date. It is in correction territory, 16.9% below its multiyear high of $59.99, set on March 2, 2015. The stock set its 2016 low of $46.73 on Jan. 15.

The weekly chart is neutral, with the stock below its key weekly moving average of $52.22 and above its 200-week simple moving average of $43.17. The weekly momentum reading ended last week at 34.57 up from 34.26.

Investors looking to buy Texas Instruments should place a good-till-canceled limit order to purchase the stock if it drops to $42.39, which is a key level on technical charts until the end of 2016.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $59.19, which is a key level on technical charts until the end of March.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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