Another Opportunity To Profit From The Leading Sector

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.

https://lh4.googleusercontent.com/0PZuki9YXjghj9nKH2T_UbF86rQreq1wU7YkE9Ix8R7EBu-mZNV7KCUtxRlvpyfyaSOmGN8T7cK2jlM1EW_BSnpPdxp3CBAnOI0GuLnd2vODPj4OsIfWPWXZMGoAnEuTY_aR6jl5

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. 

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily