Semis? Road? Huh? Is this a car magazine?
Ok, let me clear this up – not trucks, it’s the semiconductor stocks I’m referring to.
And by “road” I mean the plentiful chart space they can cover on their next leg up, which might very well be commencing right now.
Honestly, it’s been a while since I was this excited.
The names I’m about to tell you tick off all of the boxes that would get me long in this market.
Let me show you what exactly I’m talking about here.
What do you buy in the strongest bull run ever?
There are a number of factors that can give you an advantage: relative strength, strong sector, massive chart breakouts.
Or? You can buy these semis and get all three AT ONCE!
Leading Industry? Check!
SMH, the sector’s main ETF, is up over 40% on the year and has doubled from it’s March’s dip.
Breakouts from long-term bases? Check!
All of the picks are pushing out of monster consolidations as we speak. Some – to all-time highs!
Relative Strength? Check!
You already know what this one means.
Getting excited yet? Good. Let’s dive right into it.
I start off with Semtech Corp (SMTC). Here’s what it looks like:
The chart itself speaks louder than words.
SMTC is just the latest addition to the list of names pushing out of multi-decade(!!!) bases to all-time highs.
AMD did this earlier this year…and has doubled since.
I see no reason why it’s closest peer can’t follow along.
Key level for a long trade is $60. Everything above it I consider bullish and believe the stock can hit $92 in the near term.
Lattice Semiconductors (LSCC) is cut from the same cloth:
In fact, I already called out a long on this one at $24.80 in May with the target set at $39.50.
The stock hit the target and went further – we’re now finally above all-time highs.
The name continues to demonstrate impressive relative strength, so the momentum very much remains on our side.
The $41.5 level here is crucial, if LSCC can hold, the next logical resistance point doesn’t come till $66.
I top this one off with a big boy – KLA Corp (KLAC), with a market cap of $37B! It dwarfs the $4.5B and $5B respectively for the first two, but doesn’t make the name less exciting.
I really like the successful retest of support followed by the move up and to the highs.
This stock might be where SMTC and LSCC will get to a few months down the road. And why shouldn’t it keep going?
In fact, on a relative basis it is now performing better than ever.
The line in the sand here is $230 with the next inflection point at $304.
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I brawl about the media a lot.
They’re guilty of many things and one of the bigger ones is shortsightedness.
Their continuous hysteria and doom and gloom calls lead many to believe that what goes up must quickly come down.
Anyone who tuned in has been taught that anything up for a few months could be nearing or already in bubble territory.
Well, then what will they say about being up for 12 straight years?!
This is exactly what everyone’s favorite sector – Tech – has done… and the data actually helped me pinpoint when it was going to happen.
Let me show you what I’m referring to here.
As you may recall, last week I noted an unusual change of character in Tech. .
Here’s the tech heavy Q’s chart I pointed to:
My main concern was that it was one of very few sectors to not break higher.
In fact, it even slipped lower right off that $300 wall in a bearish manner.
Then the rotation came…
My custom Laggards/Leaders index showed an aggressive outflow from the inflated sectors:
Cashing out of outperformers and into laggards surely was no good news for the high-flyers.
I noted that if weakness continues over the next few days, this might be at least a temporary turning point.
Well, it looks like we can all breathe out for now…
QQQ hasn’t failed and is trying to grind back to $300.
Will it get there and push through? I don’t know.
But as we’ve learned – what goes up, must
come down, keep going.
With great strength all around, it’s very possible this was just a hiccup and the sector is about to go back to what it does best – rally.
If that’s the case, I’ve got exactly the pick for you!
I’ve spoken about Fastly (FSLY) quite a few times.
In August, I called out a long on a hold above $74 with the target at $113.
Sure thing, the stock got there a few weeks later, but a lot has happened since…
A bad earnings report brought us nearly 40% lower and crippled the relative performance.
FSLY has definitely lost some steam but could it be just a dip?
If the stock were to make a comeback (much like the sector), now would be the best spot to do so.
In fact, it’s already showing some promise – just last week we saw a failure to move below $74 support as it snapped right back up.
For now, the obvious plan is to trade the same range – if it holds $74, no reason it can’t retest $113 again.
Bigger picture, the primary trend remains higher. It’s reasonable to expect eventual resolution to the upside, especially if the sector gets going again.
At last, I’m glad to report we’re not in a split market environment any longer.
The uncertainty of the past few months has seen resolution to the upside across virtually all sectors.
In fact, it’s becoming increasingly hard to find an industry/index that has not broken out to new highs yet.
Don’t get me wrong, though, you’ll still hear the fear mongering from the media and the so-called “experts” react to news rather than provide actionable trade ideas…
The data I’m looking at makes it crystal clear – there’s strong internal support in the market and a strong appetite for equities and other risk assets.
And, what better to do in a bull market than join the strongest names and ride ‘em up?
Here are 3 stocks on the verge of breakouts with huge short-term upside potential:
We start with Keros Therapeutics (KROS) – a name I have not covered previously.
This is a hot biotech stock that’s already tripled since its IPO earlier this year.
I love the chart with the steady uptrends on both absolute and relative basis.
It has previously had some trouble around $63 but with the last week’s move back into the area it seems poised to become the latest name on the list of breakouts.
If KROS can hold above $63, the trade plan is to be long for a quick move to $85.
Next one up is Cognex (CGNX).
I spoke about this one in July when I called the long above $58 with the target at $73.
Well, It’s just hit the target and is now consolidating right below it.
$73 also happened to be a resistance area of over 3 years.
With the market fully on its side – completion of the breakout and next leg higher should be just a matter of time.
The trade plan is as always: long above $73 with a short-term target at $96.
Last, but not least, I got Eqovua Water (AQUA).
It’s a mid-cap industrial name that focuses on water pollution services and technologies.
Here’s what the chart looks like:
Admittedly, this is not the strongest stock in the world, although it’s done perfectly well.
What’s more important, however – it’s having a clean breakout higher from a multiyear base and above big resistance of nearly 3 years.
As long as the move above $25 holds and confirms, there’s no reason to not be long for a quick move to $36.
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