This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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Chip Stocks Face Make Or Break Moment For First Time in 3 Years
The FANG stocks weren’t the only stocks having a difficult time last week. The chip stocks have been another group that has struggled lately. The semiconductor ETF SOXX is nearly 8 percent off their June highs, and the chart looks pretty weak presently.
The group has been in a long-term uptrend since the beginning of 2016, but now that trend is being put to the test. The biggest problem the group faces whose going to be the one to lead the sector higher?
Nvidia surprised investors when it guided down its upcoming quarter, and that sent shares lower on Friday by roughly 5 percent. Nvidia needs to hold its current price to keep the trend in place on its chart, but shares are facing a drop to nearly $217 should the trend not hold.
Broadcom’s stock hasn’t been the same since it try to take over Qualcomm, and then things got worse when it said it would buy CA. The market is still having a tough time digesting the acquisition, and one has to wonder now if Broadcom makes more reckless transactions in the future to keep growth rising. So far $200 has held firm for Broadcom, but the stock could be facing a drop to $180 should it not hold.
Qualcomm got screwed over when the Chinese regulators would not approve its acquisition of NXP Semiconductor. I worry about Qualcomm, and I think it faces incredible amounts of pressure to figure out how to grow the top line. Their license business has come under assault, and now one has to wonder when the revenue slide for the company will stop.
$69 is firm resistance for the stock, and $49 is firm support. Should the stock reverse here or fail at $69, $49 seems likely.
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Intel had everything going its way, and then out of left field the CEO stepped down, and the stock hasn’t been the same. The company is well positioned to continue to grow, but until a new CEO comes in, the stock may struggle. And now it looks like there is a real chance this touches $42.
Applied Material fell hard after reporting results, and now $41 becomes a must hold level.
Micron has been crushed of late, and for the most part, I still see Micron as a gross margin story, and its low valuation continues to make me think the market does not believe the recent gross margin expansion last.
Right now, the chip stocks look to be in trouble for the first time since 2016. The one glimmer of hope? Apple’s new phones come in about a month.
Have a great day.
Michael Kramer is the Founder of Mott Capital and the creator of Reading the Markets.
I started learning to invest when I was 16 years old. At 40, I have pieced together a long career on Wall Street, working as an analyst, and a domestic and international equity trader at two multi-billion dollar equity firms.
I started Mott Capital in 2014 to follow a passion and dream of being in control of my career path.
The idea behind Reading the Markets was to help both individual and institutional investors benefit from my experience in the business and my unique approach to dissecting stocks and the markets, which helped me become a great trader.
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