Three different semiconductor stocks, three different ways of looking at a pullback.
Leader of the semiconductor pack, Intel Corporation (NASDAQ: INTC) has traded lower for the past two days in a row, but is not yet in technically oversold territory. Trading down to new, two-week lows after pulling back by more than half percent on Wednesday, INTC actually has been under the sway of sellers for most of the past week, finishing down for four out of the past six sessions.
But traders may want to wait for additional profit-taking in INTC before wading in on the long side. The stock’s short-term edge is actually a negative as of Wednesday’s close. And even with a one-point ratings upgrade, shares of Intel are trading with neutral, 6 out of 10, ratings as of middday Wednesday.
Another story entirely is the plunge in SanDisk Corporation (NASDAQ: SNDK). SanDisk began selling off after hours on Tuesday, and opened lower by more than 8% Wednesday morning.
Despite rallying over the previous two days, SNDK had been moving generally lower since reaching new, two-week highs in late March. The Wednesday pullback has not only taken the stock back into technically oversold territory, but sent shares of SNDK below their 200-day moving average.
SNDK’s plunge into bear market territory may invalidate the stock from consideration for many traders uninterested in buying stocks below their 200-day moving average. This is not without good reason. The 200-day moving average is a sound and quantified “line in the sand” when trading stocks and ETFs, and the fact that SanDisk doesn’t have a higher rating than a neutral, 5 out of 10, is in part a reflection of the fact that the stock is trading in bear market territory.
That said, the short-term oversold character of SNDK cannot be denied. The stock has a short-term, positive edge of more than two and a half percent, and is trading near the same levels where it broke out back above its 200-day moving average in mid-October 2011.
So if Intel is still too cool and, for some traders, SanDisk too hot, is there a semiconductor stock that is just right? Traders and more active investors may want to focus on stocks from this sector that are not only pulling back into short-term oversold territory (as SanDisk is), but are also trading well within bull market territory above their 200-day moving averages.
An example of such a stock is Advanced Micro Devices (NYSE: AMD). Trading in bull market territory since late January, shares of AMD have slipped into a three-week, trading range near multi-month highs.
Pulling back by more than 2%, Advanced Micro Devices has fallen to new, two-week lows for a second day in a row, and is back at technically oversold levels. The stock earned a one-point ratings upgrade to 7 out of 10 midway through Wednesday’s session, just below our “consider buying” category, and a positive edge of almost one percent in the short-term.
Other stocks with comparably strong ratings and positive, short-term edges in this sector include Texas Instruments (NASDAQ: TXN) and Xilinx Inc. (NASDAQ: XLNX).
(Read our recent coverage of the sector in our DataTrader column for Wednesday, “Micron Tech and the Selling in Semiconductors”.)
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David Penn is Editor in Chief of TradingMarkets.com