The recent dip in semiconductor stocks (-4.74%) provides an opportunity for many candidates in the group.
Several of the IBD50 names bolted higher, keeping the technology sector (XLK) and Nasdaq (NDX) above the 50sma.
AEIS is Ranked #1 in its sub-industry group, manufacturing power conversion products that transform power into useable forms. RSI suggests higher prices, while MACD and volume signify momentum has returned to the bulls. The stock issued a buy signal yesterday. Look for 69.55 then 70.64. Earnings are May 1, so we will only trade this short term, then again after earnings are in place. Use the TD setup for entries and stops.
AMAT is another example. Volume, MACD and RSI all confirm buyers are back.
Nasdaq never dropped below the 50sma, like the other indices. Since this is the case, we have been focusing on stocks that trade in technology industries and list on the Nasdaq Composite. Additionally, NDX relative strength to the S&P500 is climbing, as RSI continues through 50. This relative strength is propelling NDX towards fresh ATH.
Number One Ranked MCHP rebounded 5.92% this week. The company manufactures digital signal micro controllers, flash memory products and mixed signal and interface devices.
Number Five Ranked AMKR is in this group, exhibiting buying interest as it propels out of this recent base. In the process, the stock is building the right side of a cup, with a potential handle forming above this zone. Volume shows institutions are interested, while RSI suggests higher prices are in order.
We are considering a trade in AMKR, once we can confirm the actual earnings date. The company does not confirm what other sources forecast, April 25 or April 26. We will continue to check with the company until we get a confirmed date. Do not take the income trade until EPS is confirmed.
That said, let’s look at the potential trade.
We have the option of generating $550 by trading covered calls. You would like to buy 1000 shares of the stock and sell 10 contracts of AMKR 2017 19-MAY 12.00 CALL. If assigned, we have the potential of making a profit of $670, while also providing 4.6% worth of downside protection for this position.
- Premium: $550
- Potential Profit if Stock is Above Strike: $670
- Downside Protection: 4.6%
- This is break-even $11.39 (sell here with no loss should the stock pullback)
S&P500 futures are higher, while gold, crude and yields are flat to slightly higher.
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