Software Has Strong Competition:
For the third consecutive week the semiconductors outperformed the software group, as the SMH put in another strong week rising 3.8%, compared to the SMH gaining a respectable 2.4%. The strong action POST breakout from a 116.06 cup with handle pivot on 7/18 is a good sign, and the ETF is now a bit extended, so be patient picking your spots with leaders for long term positioning. Some in the space for sure continue to struggle as INTC recorded its third straight negative earnings reaction falling 1.1% Friday, after drops of 9 and 5.5% on 4/26 and 1/25. In the software space, a group that is by no means weak, it witnessed a very robust move from TTD higher by 18.4%. Hard to believe that jump was just its third best weekly move of 2019, behind pops of 25 and 23.2% the weeks ending 2/22 and 6/7.
New Kid On The Block:
Out with the old and in with the new. In natures term it is called survival of the fittest. In stock market jargon it is seen as simply rotation. XLNX was the shining light the semiconductor group, as its only name that was worthy of a leader, rising 99.6% during the weeks ending 10/26/18-4/19. Times have changed, and that is healthy. It’s recent woes are difficult to understand, but the PRICE action is not (the beauty of technical analysis). This week it delivered its second straight negative earnings reaction falling 3.4% on 7/25, after a slump of 17.1% on 4/25. A chance was given for someone else to step up and IPHI was ready for the task. Its current TEN week winning streak has seen a gain of more than 60%.
The semiconductors run continues as more names join the party. It was a small exclusive list but now potential leaders are bountiful. One such example is the chart below of CREE and how it was presented in our 7/23 Technology Note. Round number theory came into play here with the 60 figure holding the stock back, but once it was pierced on a CLOSING basis it had the effect of a beach ball held underwater. This week it scored its fourth best weekly advance of 2019 gaining more than 8%, and the right side of a potential cup base pivot of 69.31 is taking shape.