3 Reasons Why These 5 Chips Are Bullish For The Stock Market Rally: S&P 500, Dow Jones Futures
Futures for the S&P 500 index, Dow Jones industrial average and Nasdaq 100 edged higher late Tuesday after the Dow Jones led a lackluster stock market rebound Tuesday following the Facebook (FB)-led sell-off Monday, even as Facebook continued to slump. IBD 50 stocks Applied Materials (AMAT) and Lam Research (LRCX) reclaimed buy points Tuesday, joining fellow chip gear leaders ASML Holding (ASML) and Teradyne (TER). Recent memory-chip IPO Smart Global Holdings (SMH) also moved back into a buy zone.
These chip stocks provide several reasons to be bullish for the stock market rally, which was downgraded to uptrend under pressure after Monday.
S&P 500 index futures were 0.2% above fair value. So were Nasdaq 100 futures. Dow Jones futures rose 0.2% too.
Stock Market Rally Needs Growth Stocks In Buy Zones
While investors should be cautious about making new purchases with the stock market rally under pressure, one reason to be hopeful is leading stocks setting up and breaking out. And as a practical matter, a stock market uptrend isn’t that useful for active investors unless there are quality stocks in buy zones.
All five chip stocks cited here have Composite Ratings above 95. Lam Research and Smart Global boast a best-possible 99 Composite Rating. ASML has a 98 CR, Applied Materials a 97 and Teradyne a 96. The Composite Rating combines several proprietary ratings, including on earnings and other key metrics. All-time stock winners often have Composite Ratings of at least 95 before making their big runs.
Smart Global has a relative strength line in new high ground. The RS line tracks a stock’s performance vs. the S&P 500 index. An RS line hitting new highs ahead of or amid a breakout is a bullish sign. Teradyne and ASML also have RS lines at record highs, while Applied Materials and Lam Research are not far off.
ASML shares edged down 0.1% to 212.60 in Tuesday’s stock market trading, holding above a 208.68 buy point. Teradyne rose 0.6% to 48.99 vs. its cup-base entry point of 48.63. Applied Materials climbed 1.25% to 59.23, moving above its 58.83 buy point from a double-bottom pattern. Lam Research advanced 0.7% to 219.13, just above its 218.88 double-bottom entry. Smart Global vaulted 6.2% to 44.92, moving back above a 43.25 buy point and rising to the top of the 5% chase zone.
Facebook Isn’t Hammering Leading Growth Stocks
Facebook has fallen more than 9% already this week, plunging through key support. It’s a major component of the Nasdaq composite and S&P 500 index. Also, Google parent Alphabet (GOOGL), Twitter (TWTR) and Snap (SNAP) also fell at least in part in sympathy. But so far, despite Monday’s sell-off in the major averages and Tuesday’s tepid bounce, leading stocks haven’t suffered too much damage.
Chip Stocks Are Key To Stock Market Rally
Not every stock market rally needs semiconductors playing a big role. But the chip sector is a big part of the overall market, especially the Nasdaq. And chips are in virtually every tech product, from smartphones to PCs to servers as well as automobiles and so many other products. So if chip stocks and companies are doing well, that likely bodes well for tech stocks and companies overall.
In addition to the five chip stocks cited here, a number of semiconductor manufacturers are near buy zones. Chip giant Intel (INTC) is near a record high, though it doesn’t have a potential buy point right now.
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