Semiconductor Sector: A Buying Opportunity

Semiconductor Sector: A Buying Opportunity

Posted On May 27, 2020 2:42 pm

The Semiconductor Conductor Sector has fared fairly well during the past few months, enjoying one of the strongest bounce backs sine the broad market or “SPDR S&P 500 (SPY – Get Rating)” low in late March.

While SPY has rallied some 25% from the March low and is still 12$ from the February all-tome-high. The “Semiconductor ETF (SMH)” has rallied 44% and is a mere 8.8% from its all-time high.

Yesterday the group took a hit as part of the larger rotation trade, that is people dumping the stay/work from plays such as game makers like “Activision (ATVI)”—the day ended with “Nasdaq 100 (QQQ)” down while the “Russell 200 (IWM)” was up some 3.5%

Today the losses are extending after U.S Commerce Secretary Wilbur Ross said, the U.S. will block semiconductor shipments to Huawei for national security reasons.

Under the change, companies using U.S. chipmaking equipment must obtain a U.S. license before supplying to Huawei or its affiliates.

Shares of top stocks such as “Nvidia (NVDA)” and “Advanced Micro Devices (AMD)”  are down over 5% at midday and lost nearly 10% in just the past two days.

I think this presents a buying opportunity.

In the past, people used to adhere to the ‘Dow Theory’  which saws the market says the market is in an upward trend if the main Dow, advances above a previous important high and is accompanied or followed by a similar, the Dow Jones Transportation Average (DJTA).

The thinking was the transports, which are comprised of truckers, cargo ships railroad, and delivery by air such as “FedEx (FDX)” provides the true pulse of the economy.  Transports need to conform to the broad market and the rebounding economy, or it can be a forecasting tool for predicting a recession.

Trouble is that this COVID-19 virus… Continue reading at StockNews.com

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Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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