Novellus, Advanced Micro and the Sale on Semiconductor Stocks

A little over a week ago, I alerted traders to the potential for weakness in semiconductor stocks in the near-term (see “A Bearish Sign from the Semiconductors”). In the days since, a number of leading semiconductor stocks have begun to pull back and could represent potential short-term opportunities for swing traders and more active investors.

Shares of Novellus Systems (NASDAQ: NVLS), for example, had closed lower for three days in a row before Thursday’s breakeven session. In its second pullback since rallying to new, 52-week highs at the beginning of February, NVLS is not as oversold as it was earlier in the month when the stock closed in technically oversold territory for three out of four trading days. But the selling in NVLS has earned the stock a “consider buying” rating of 8 out of 10 ahead of trading on Friday, as well as a positive, short-term edge of nearly three-quarters of a percent.

Buyers already have begun to take advantage of short-term weakness in Advanced Micro Devices (NYSE: AMD), bidding the stock higher by 2% on Thursday after a three-day retreat. Shares of AMD have only been trading in bull market territory since late January, and the current sell-off in the stock is Advanced Micro Device’s first above the 200-day moving average in many months. Having gained some ground in Thursday’s session, AMD’s rating as slipped from a 9 out of 10 to an 7 out of 10, just outside of our “consider buying” category heading into the final trading day of the week.

Going in the opposite direction in terms of its rating on Thursday, shares of Micron Technology (NYSE: MU) were upgraded from 8 out of 10 to 9 out of 10 as the stock sold off for a fourth day in a row. Off more than 2% in Thursday’s trading, MU is now technically oversold above the 200-day moving average and trading at new, two-week lows.

The pullback in MU represents the stock’s second visit to oversold levels and short-term lows since returning to bull market territory in the middle of January. Then, a three-day sell-off ending in oversold territory set the table for a five-day rally of 7%. And by the time the stock was again making new, short-term highs a week and a half later, MU was higher by well over 9%.

Heading into trading Friday morning, Micron Technology is set to open with a significant, short-term edge of nearly one and a half percent.

For traders interested in less volatile ways to trade the sale in semiconductor stocks, pullbacks in exchange-traded funds like the Market Vectors Semiconductor ETF (NYSE: SMH) may be worth a review. SMH has closed lower for four days in a row above the 200-day moving average, the most recent two finishes in technically oversold territory. Additionally, there is a leveraged ETF option, such as the ProShares Ultra Semiconductor ETF (NYSE: USD), which has finished lower for two out of the last three days.

With biotech stocks like Vivus Inc. (NASDAQ: VVUS) soaring after pulling back into oversold territory last week, you don’t want to miss our latest look at the biotechnology sector. Click here to read, “Buying Time for Biotechnology Stocks?”

And be sure to read our latest from 7 Stocks You Need to Know: “Buying the Selling in Weight Watchers”.

David Penn is Editor in Chief of