Friday, December 07, 2007

Time for the semis?

If you are not wanting to invest into an individual stock, and are looking for something of value which hasn't the taint of financials, then the semiconductors could be the sector for you. Technology stocks have played a background role in the cyclical bull market, losing interest to the more energetic, commodity-based stocks. Technology is one of the early leaders out of recession and the semiconductors are a key component of any recovery. The sector has taken a beating since July, losing over 20% of its value - a true bear market and a worrying measure of the state of the economy. However, a number of factors have come into play which give the sector a distinctly bullish (technical) feel:

[1] The recent break of declining resistance
[2] New near term highs
[3] A clean break of the 20-day MA
[4] A bullish divergence in the CCI
[5] Rising MACD following earlier 'buy' signal (although deep below the bullish zero line - so watch for a retest of 401 lows).

Dollar cost averaging into the Semiconductor ETF (SMH) for the next few months should see a prosperous new year.