The Basics of Smart Stock Trading (INTC, TXN)

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Semiconductor companies offer many highly liquid stocks that encourage risk taking at all times, from intraday scalping to monthly market timing. The sector also supports various profit strategies including momentum trading, basket allocations and short selling. It acts independently in many market phases, going its own way when major indexes rise or fall. This divergent behavior brings additional opportunities, even in difficult macroeconomic conditions. There are many ways to trade the semiconductor space, from identifying particular stocks to investing in the industry as a whole using exchange-traded funds (ETFs).

Exchange rates (forex) impact the performance of the sector as a whole, with only two of the five most capitalized components based in the United States: Intel (INTC) and Texas Instruments (TXN). Additionally, a strong US dollar hurts chipmakers with large overseas operations, as their products become less competitive. This is especially true in mature subsectors that show lower profit margins, such as memory chips and electronics used in audio parts. The specter of tariffs on Chinese exports to the United States also worries investors in semiconductors where some parts or assembly processes take place overseas.

Find the best chip shop

BEST SEMICONDUCTOR STOCKS

Name (Symbol) Q3 2018 market capitalization
($ billions)
Intel Corp (INTC) 207.70
NVIDIA Corporation (NVDA) 145.87
Texas Instruments Inc (TXN) 97.48
Advanced Micro Devices (AMD) 25.87
Applied Materials Inc (AMAT) 33.16
Marvell Technology Group (MRVL) 12.09
Micron Technology Inc (MU) 3.68

Stocks at all levels of market capitalization can offer good trading opportunities, but most market participants stick to the most popular names, playing these issues against the performance of the Nasdaq 100 leading or lagging. Blue chip US semiconductor companies have a bigger impact on this index than the S&P 500, where they share a dual listing. These connections between markets also support a variety of counter-strategies when stock performance deviates sharply from index performance.

Mid-cap and small-cap semiconductors generate a steady stream of dynamic gaming and trend-following, as they typically have the highest growth potential. Finding these must-have players requires a database that sorts first by capitalization and then by performance, looking for the strongest uptrends in technical strategies and the fastest revenue growth in fundamental strategies. The $500 million to $2 billion cap zone provides a great place for emerging companies that haven’t yet garnered public interest, making it a great starting point to study and prepare for the weekend. -end.

The Truth Behind Semiconductor Chip Stock Trading

Semiconductor ETFs

BEST SOLID STATE EXCHANGE TRADED FUNDS (ETFs) FOR 2018

Name (Symbol) Average volume
iShares PHLX SOX Semiconductor Sector Index Fund (SOXX) 449,300
Market Vectors Semiconductor ETF (SMH) 1,280,000
SPDR S&P Semiconductor ETF (XSD) 31,000
Bull 3X shares in Direxion Daily Semiconductor (SOXL) 85,000
Invesco Dynamic Semiconductors (PSI) Portfolio 4,100
ProShares Ultra Semiconductors (USD) 6,250
Direxion Daily Semiconductor Bear 3X Stock (SOXS) 73,600
ProShares UltraShort Semiconductors (SSG) 38,000

Market Vectors Semiconductor ETF (SMH) attracts the most volume as it is the oldest exchange-traded fund in the industry, with the newer iShares PHLX SOX Semiconductor Sector Index Fund (SOXX) providing direct competition. SOXX has a higher expense ratio, holds more assets, and tends to hedge a higher percentage in a typical trading day than SMH. SMH trades with a tighter bid-ask spread, facilitating price-sensitive swing trading strategies, while SOXX’s wider spread supports higher-risk momentum trading strategies. SMH also has the largest open interest in its listed options compared to its peers.

Direxion Daily Semiconductor Bull 3X (SOXL) stocks and Daily Semiconductor Bear 3X (SOXS) stocks offer aggressive players much higher sector leverage, offset by increased risk and higher costs. These securities are designed to return three times the movement of a typical sector index. This works well with multi-day betting, but intraday returns can vary widely due to the periodic calculation of relative value, often resulting in chaotic end-of-day price action that diverges sharply from a sector ETF with no effect. . of leverage.

An example of ETF trading

Image by Sabrina Jiang © Investopedia 2021


Here is a historical example of the iShares PHLX SOX Semiconductor Sector Index Fund (SOXX) from late 2008 to 2009. As shown in the chart above, SOXX stocks broke through the September high (blue line) in November and reached a record level. to 96.03 in December. It sold in a bullish flag pattern (red lines) in February, testing support at the breakout level and the 50-day EMA. The Nasdaq 100 took off on February 10 (black arrow) – in reaction to positive news from abroad – and rose more than 1.3%. This outperformed the S&P 500 and other large cap indices. Semiconductors underpin this tech rally, with the SOXX rising over 3%, breaking out of the flag pattern and triggering a major buy signal.

The essential

Chip stocks provide the largest basket of tech companies listed on US exchanges. The significant variations between the sub-components provide an endless variety of trading and investing opportunities in divergent market conditions. Semiconductor ETFs also offer a good way to gain exposure to the sector.

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