December 13th, 2011

Revisiting Semiconductor Industry and Stocks

There’s one industry group that stands taller than the rest in the amount of frustration and tears it’s brought to investors’ eyes over the last ten years.  Many thought the industry would recover after the excesses of the Tech Bubble was wrung out of those stocks with the Crash of 2000-2003.  Alas, the group has failed time and again in its attempt to climb above a wall of resistance.  Only a handful of individual members of the group have seen their stock come close, let alone surmount, the highs set in 1999 and 2000.  But hope springs eternal.  When the market regains its strength, this groups will make another attempt to break through the wall and, perhaps, this time successfully move out of the range.

Last May (see:What’s Happening to Semiconductor Stocks), I wrote:

“As bulls and bears struggling it out for control to determine if the semiconductor group can final cross into territory not seen since after the Tech Bubble burst in 2001, the decision every individual investor with a stake in that struggle, like myself, has to make is whether to sell any or all of their semiconductor-related stocks today or should they try to weather out what could be a the long and possibly disappointing struggle of the big boys. Furthermore, how long might this contest take? Weeks? Months? Quarters? And what opportunities, if any, might be lost by having money tied up in semi’s?


The Bulls failed in 2003 and 2007; there’s no guarantee they won’t fail in 2011. I think I’m going to step back a little and watch this from the sidelines.”

That was the correct decision for many reasons.  The Semiconductor Group was able to march up to the target but then its struggle turned out to also coincide with the European debt crisis and the impact that had on our markets.  Here’s a more recent long-term view of the SMH (Semiconductor Holders etf):

SMH (Semiconductor Holders) 12/13/11

Looking at SMH can be a bit deceiving because the charts of each of the 17 stocks comprising the eft look so dramatically different.  Yet there are some similarities.  The most common is that all are close to another attempt at changing the prevailing descending trend.  One example is TXN (Texas Instruments):

TXN 12/13/11

TXN (Texas Instruments) 12/13/11

Another is BRCM (Broadcom):

BRCM (Broadcom) 12/13/11

A third is INTC (Intel):

INTC (Intel) 12/13/11

We are all short-term traders and these are all long-term views but …… if and when the semiconductor industry is able to cross above its major resistance level (if we live that long) then they should provide years of solid growth and capital gains.

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