Being a semiconductor stock is like being from the “technology wing of the technology party.” Whether it is in PCs or mobile devices, due to the advent of smart cars and smart appliances or the rise of The Cloud, few things seem to drive the tech sector like the capacity of semiconductor companies to make our machines move faster, work harder and make our lives that much better.
This is why the group is considered the leader of the overall technology sector. This is why some traders look to such phenomena as divergences between the behavior of semiconductor stocks compared to technology as a whole for potential clues as to whether the larger sector, or even the larger economy, is due for a surprising move.
Here our take on semiconductor stocks is in many ways more pedestrian. Many of these stocks have had great runs. And many traders who have benefitted from those runs appear to be at least starting the process of taking profits. And if that profit-taking continues, many of these semiconductor stocks could be available at their lowest, most oversold levels in weeks if not months.
The semiconductor stock that is most interesting in this regard right now is Novellus Systems (NASDAQ: NVLS). Shares of NVLS rallied to new, 52-week highs late last week, and have pulled back over the past two days as traders have locked in gains and taken profits. Down more than 2% and trading midway between recent, short-term highs and recent, short-term lows, NVLS has a positive edge of more than three-quarters of a percent and neutral ratings of 6 out of 10.
Other semiconductor stocks that have begun to sell off significantly as the week gets underway are Kla-Tencor Corporation (NASDAQ: KLAC), whch pulled back by more than 2% to finish at its lowest level in a week. KLAC has a positive edge of half a percent in the short-term, and has earned a two-point ratings upgrade based on Monday’s selling alone. Additional weakness in the stock could help KLAC earn another two-point upgrade which would put Kla-Tencor in our “consider buying” category in the near-term.
Sellers have already appeared to take control of Triquint Semiconductor (NASDAQ: TQNT). Unlike KLAC and NVLS, shares of TQNT are trading below their 200-day moving average – and have been since the summer of 2011. The stock had rallied into overbought territory on Friday, after climbing for four consecutive sessions. Shares of TQNT sold off by more than 2%, and still have “consider avoiding” ratings of 2 out of 10.
Want more stocks? Read our latest from 7 Stocks You Need to Know: “The Intel Pullback as Pitstop: Three Down, Six Up”
David Penn is Editor in Chief of TradingMarkets.com