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The tech sector is the stock market's bellwether, as we’ve seen tech companies flying high and outperforming the broad market since the start of the year. Indeed, even the S&P 500’s bullish streak is mainly attributed to tech stocks.
While some may say that Tech has already squeezed out everything it could, others would beg to differ that there is still room for more. While we can never predict where the market will go, we can find clues on their potential if we look closely at the market leaders and their price action.
For instance, if we look closely at semiconductor companies, we see some potential targets showing signs of continuation. This article will look at three semiconductor stocks that will continue to increase before the year ends.
Lam Research Corporation (LRCX)
Lam Research Corporation is a semiconductor company specializing in a wide range of wafer processing and services used in manufacturing the latest chips for various applications in the market. The company works with Samsung Electronics, Intel, and Taiwan Semiconductor Manufacturing (among others). Its flagship product families, SABRE, Kiyo, and VECTOR, are its most popular processes. The company has previously announced the world's first Bebel Deposition Solution with its Coronus DX. This aims to increase chip production yield further and cement its leadership in bevel technology.
Are we going to see another breakout soon?
LCRX is currently trying to break out from its previous resistance area around the $725.00-$730.00 area. It’s trying to consolidate and build short-term support while its 20-day moving average plays catch-up. Its 14-day RSI shows that momentum has slowed down and broken down from its oversold condition. This gives traders and investors willing to buy into LRCX a bit of time to make plans while observing the price action on LCRX. They can either wait for the breakout and confirmation or wait for the short-term moving average to establish support and buy into LRCX.
Nvidia Corporation (NVDA)
Nvidia Corporation is a technology company best known for its GPUs (Graphics processing unit). The company has been at the forefront of mainstream artificial intelligence (AI) forefront. It has arguably been one of the companies that helped grow AI technology into the mainstream today.
The company has been designing chips that could help process complex AI tasks, enable facial, image, and speech recognition, and generate text for chatbots. Further, NVIDIA has been making technological strides with partnerships from companies in various sectors like biotech and pharma, cloud computing, and robotics, just to name a few.
Should you wait to buy Nvidia?
NVDA has been one of the stellar performers of 2023 - thanks to it being at the forefront of the AI boom. That said, it has been moving sideways since August, but its recent price action suggests we may resume its current trend. Price is now on its way to establishing immediate support after breaking down from its short-term 20-day SMA (red line). Its 14-day RSI has breached its 50-midpoint mark. This tells us that another trend may start on the opposite side of the trend in the short term, or buyers may step in and push the price and momentum back to their bullish zone to begin resuming the trend.
Investors looking to buy into NVDA should watch closely how prices react to the 20-day and 50-day SMA, as we might see another gap from the semiconductor giant.
Broadcom Inc.(AVGO)
Broadcom Inc. is a technology company that designs and produces enterprise software, security solutions, and semiconductor products. Its products and services include intellectual property (IP) licensing, cyber security solutions, mainframe, FC SAN (fiber channel storage area networking), radio frequency semiconductor devices, private and hybrid cloud infrastructure, etc.
The company recently acquired VMWare to enable enterprise clients to create and modernize their hybrid and private cloud environments.
Is now the time to buy AVGO?
AVGO has made several attempts to break out from the $925-$930 mark for several weeks and finally broke out last November 10th. Prices are now starting to carve out short-term support as it tries to test its immediate resistance-turned-support.
The 14-day RSI shows price momentum is still waning and crossed just below its 50 midpoint line. Investors looking to buy into AVGO should wait for prices to stabilize on support or break above its 20-day SMA to confirm the new immediate support for another follow-through on its bullish trajectory.
Final Thoughts
Buying into high-performing stocks has been a tried and tested strategy by many momentum traders. While this strategy has its merits, traders should also understand that it has limitations and any strategy has risks. Traders should always employ proper risk management to ensure they have the appropriate risk-reward expectations on momentum strategies.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
