The semiconductor sector has been one of the leaders, and we’ve been on top of it here.
If you’re in the SMH trade from a couple weeks ago you’re off to a great start.
This is a sector that is likely to continue to lead if the market continues higher, so today’s trade is another way to profit from this.
Here’s a new way to play the semiconductor trend.
As you can see from the chart below, Cree Inc. (CREE), is trying to breakout of 6-week consolidation.
There are two levels to focus on.
The first breakout is $60, which has been the strongest resistance, and the second level is the range high of $61.50.
Since it is sitting between the two levels, this is how to play it.
Today’s low, and the $60 level line up, and therefore define a good stop.
I’d use a trade under $59.50 as the stop so that $60 has some wiggle room to hold.
Since $61.50 is not far away, use that as the entry if it continues to move higher.
So the straightforward trade of buy through $61.50 with a stop under $59.50 is well defined.
In addition, there could be a retracement trade prior to the breakout.
If CREE closes over $60.50, a nimble, intra-day trader could also look to buy an intra-day dip towards $60 (not lower) with a tight stop under $59.50.
This is more of a day trade mentality that could lead to a good entry for the bigger breakout that we’re really looking for.
Rick Nartarian, Chief Investment Officer
The American Investor Daily