Dissecting The Semi HOLDR
When an industry group gets into
trouble, it pays to dig deep into its major component stocks. You’ll often find
pockets of resilience that can lead to the next batch of leaders. That’s why I
routinely dissect the stocks that make up the Holding Company Depository
Receipts.
The Semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating)
Friday gapped down at the open, undercutting just 1/8 below support on Aug. 3,
then recovered a part of the day’s losses to finish off 7.8%, the day’s biggest
loss among the exchange-traded
funds.
The basket of chip and chip-gear
makers was hit, of course, by the sell-off in its largest component, Intel
(
INTC |
Quote |
Chart |
News |
PowerRating),
and guilt-by-association declines among its industry brethren. The sell-off
followed an overnight revenue warning from the world’s biggest chipmaker. Among
the Semiconductor HOLDR’s components, Intel shed 13 35/64 to 47 15/16, Applied
Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating) 3 1/2 to 70, Novellus
(
NVLS |
Quote |
Chart |
News |
PowerRating) 5 13/16 to 52 3/4,
Micron Technology
(
MU |
Quote |
Chart |
News |
PowerRating) 2 3/8 to 52 3/4.
Not all semis are created equal. It
makes a big difference in a company’s business cycle these days whether its fate
hinges on demand from such disparate industries as personal computer manufacture
or broadband networkers or wireless communications.
For example, Broadcom
(
BRCM |
Quote |
Chart |
News |
PowerRating), a
maker of chips that enable broadband digital transmission of voice, video and
data over networks, 9 1/4 to 248 3/4 and formed a bullish engulfing pattern.
Volume was average. I would have preferred the bullish price action were
accompanied by a volume expansion.
Analog Devices
(
ADI |
Quote |
Chart |
News |
PowerRating), which makes
chips for signal processing, closed up 5 3/8 to 88 3/8.
There were other areas of tech
strength. The B2B Internet HOLDR
(
BHH |
Quote |
Chart |
News |
PowerRating) recovered from an open in the red to
end up 7.6%, the biggest gain among the ETFs. The Nasdaq 100 Tracking Stock
(
QQQ |
Quote |
Chart |
News |
PowerRating)
rebounded from its early decline to gain 5.5%.
The Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) rose 5.8%.
For a take on Friday’s trading action in biotech stocks, check out my Trading
The News commentary.Â
The Diamonds
(
DIA |
Quote |
Chart |
News |
PowerRating), which track
the Dow Jones industrial average, climbed 2.4%. Nervous money still found its
way the defensives, lifting the Pharmaceutical HOLDR
(
PPH |
Quote |
Chart |
News |
PowerRating) 2.9% and the
Consumer Staples SPDR
(
XLP |
Quote |
Chart |
News |
PowerRating) 3.4%.
If you’re new exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.Â
You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with
Average Crossovers. I also recommend newcomers read my tutorial,
HOLDRs: Unique Opportunity And Risk.