Time to Take Profits in Tech?
Whether trading in bull market or bear, semiconductor stocks have found as much favor with traders and investors in recent days as stocks from any other sector. Stocks like Intel Corporation (NASDAQ: INTC) had finished higher for five days in a row heading into trading on Friday. Up four in a row ahead of Friday’s session were semiconductor stocks like LSI Corporation (NYSE: LSI), which added another 1 1/2% in Friday’s trading.
This is the kind of buying that typically encourages novice and less experienced traders to jump in to the market with both feet. The positive feeling of seeing a stock climb day after day after day helps stoke an almost irresistible urge to buy.
The good news is that stocks like LSI and Intel – and even Intel’s “rival” Advanced Micro Devices (NYSE: AMD) – are likely to be available at lower prices. The bad news is that traders who are not patient enough to wait for those lower prices, could find themselves buying closer to near term highs than near term lows. For short term traders and active investors in particular, this can make the difference between a profitable trading opportunity and one that has to be chalked up as just another trading “expense.”
Ahead of trading on Monday, LSI for example will have closed higher for five days in a row, with the last three finishes in overbought territory. And while consecutive closes in overbought territory can often be the prelude to quality pullbacks and constructive “buying the selling” when stocks are in bull markets, stocks that are in bear market territory – such as LSI and AMD – often become the targets of short sellers when their overbought conditions develop below the 200-day moving average.
Speaking of AMD, shares of the stock sold off late in the day on Friday, ending a consecutive streak of four positive sessions, the last two in overbought territory. AMD will take a negative, short-term edge into trading on Monday.
As such, traders may begin to look on the modest retreat in Intel with anticipation. Trading just over 1% on Friday, the stock has earned a small positive, short term edge that could grow if traders continue to take profits in the wake of the stock’s rally to eight-day highs.
All of the stocks in today’s report were available from research and data available through The Machine. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com