Here’s Why I’m Interested In The Semis

June 24, 2003
Kevin Haggerty

What Monday’s Market Action Tells You

The reflex down from the extended volatility band
levels continued yesterday, as both the SPX
(
$SPX.X |
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PowerRating) and Dow
(
$INDU |
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$COMPQ |
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(
QQQ |
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PowerRating) -1.9%. NYSE volume was 1.3 billion, a volume ratio of just 12, and it
now has a three-day moving average of 28. Breadth was also one-sided at -1602.
The SPX was -3.7% high to low from the double doji bar 1015 high last week. The
last decline to the 20-day EMA was -3.9% from the May 16 948.65 high to 912,
which was just above the 909 200-day EMA. That was also a reflex down from the
one-year 2.0 standard deviation band. The SPX closed yesterday at 981.64, right
at the 20-day EMA of 981.80, which becomes a potential pivot on Tuesday. The Dow
closed at 9073 after a 9038 intraday low and re-crossing the 20-day EMA of 9047
to close at 9073.Â

In the major sectors, the BTK was -3.9% and has
declined 16.3% from its upper one-year volatility band on June 6. The XBD,
another strong group in this current rally, was -3.1% and is -8.5% from its
extended band. As I said in the previous commentary of June 13, there wasn’t any
edge on initiating any new long positions when all of the major indices and most
of the major sectors were at their extended volatility bands, regardless of
whether the Generals dressed them up into the end of the quarter ending June.
However, that doesn’t mean you can’t be ready for the intraday reflexes that
will occur this week as price approaches the 20- and 50-day EMAs for the indices
and sectors.

Today’s Plan Of Attack

The focus
on the SPX today is the 981.80 20-day EMA vs. the 981.64 close, and for the Dow,
it’s the 9047 20-day EMA. I am most interested in the
(
SMH |
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PowerRating)s, which have
declined 14% from the extended one-year volatility band, closing at 28.23
yesterday after a 27.91 intraday low, which was right at the 27.94 rising 50-day
EMA. The 200-day EMA is down at 27.07. If the semis are protected at the
quarter’s end, it will come from this zone, so stay involved. Both
(
KLAC |
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PowerRating)
and
(
NVLS |
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PowerRating) are stronger on a relative basis than the SMH and are in
consolidations at the rising 20-day EMAs. The other major semi equipment stock
is
(
AMAT |
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PowerRating), and it closed at 15.57 after a 15.34 intraday low, which was
down from the rally high of 17.64 on June 6. Watch price for any intraday setups
if it drops to the 15 zone, which is both the 50- and 200-day EMA level.Â

Another one to be ready for if the SMHs attract
buyers at this level is
(
MCHP |
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PowerRating), trading in a 24 – 22 box, just above its
200-day EMA of 22.75, closing Friday at 23.66. Keep
(
XLNX |
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also, as it is trading right at its 200-day EMA on a pullback. On the short
side, if the semis head south today, take a look at a stock like
(
MXIM |
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PowerRating),
which is trading in an 11-day range between 37 – 34, which is below all of its
20-, 50- and 200-day EMAs. It closed at 35.04.

Some momentum stocks like
(
MERQ |
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PowerRating) should be
on today’s focus list also, having pulled back to its breakout level and closing
at 39.64 yesterday, down from 44.20.Â

Have a good trading day.

Kevin Haggerty

Here’s Why I’m Interested In The Semis

BUY THE FEAR, SELL THE GREED

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