Bullish on the Semiconductors


Each evening we focus on the most interesting aspects for the upcoming trading day. The comments are based on observations of the nightly updates of the Stocks/Sectors and Market Bias pages. They are provided for educational purposes only and are not intended to be direct trading advice. Also, keep in mind that these remarks are made up to 12 hours in advance of the markets opening. Therefore, overnight events may alter the outcome of these observations.


At the time this is being published, the S&P Globex Futures are trading .70 points lower and the bond market is trading down 2 ticks.

The Semiconductors [$SOX.X>$SOX.X] are in their first pullback (a) since their meteoric run (b). As it stands today, it looks very bullish for these stocks. However, we need to watch the nature of this first pullback going forward (i.e. to make sure the trend resumes). With that said, Texas Instruments [TXN>TXN], on the Momentum 10 Technology List, is a shallow pullback that looks poised to resume its uptrend.



Bea Systems [BEAS>BEAS], on the Proprietary Momentum and Pullback Lists, is a pattern I call a Trend Pivot Pullback. This is where a strongly trending stock has a one day false rally. This forms a pivot point-a high surrounded by two lower highs. The theory of the pattern is that the one day false rally draws in and subsequently shakes out the weak hands. This often clears the way for the stock to trade higher, especially if it can take out the pivot high (in this case, Monday’s high, around 75 3/8).

Back Web [BWEB>BWEB], mentioned last night, looks poised to rally out of a flag consolidation pattern within a wide range day (a). Just use caution as this one is also on the Trading Where the Action Is List (see warning about stocks on this list in last night’s Outlook).



For you breakout players, Aspect Telecommunications [ASPT>ASPT], mentioned last night, rallied out of a pullback today and is just shy of taking out its old highs. HNC Software [HNCS>HNCS], on the New 60-day Highs on Double-Volume List, broke to new highs on an expansion of range today out of a pullback formation. And finally, Netbank [NTBK>NTBK], also on the New 60-day Highs on Double-Volume List, appears to be in a fast move out of a loosely formed cup and handle pattern.

On the short side, Gilead Sciences [GILD>GILD], mentioned last night, continues to form a narrow range and may be poised to break lower. Watch this one over the next few days.

Best of luck with your trading on Wednesday!

PS – Reminder: Protective stops on every trade!