Micron, Applied Materials Clear Buy Points; S&P 500, Nasdaq, Dow Jones Futures | Stock News & Stock Market Analysis

Futures for the S&P 500 index, Nasdaq 100 and Dow Jones industrial average were little changed early Tuesday morning.

X During Monday’s session, the S&P 500, Dow Jones and Nasdaq composite all rose more than 1%. Micron Technology (MU) and Applied Materials (AMAT) both broke out from double-bottom bases, at least intraday, though trading volume wasn’t impressive. Meanwhile, fellow chip plays Lam Research (LRCX), Marvell Technology (MRVL) and Monolithic Power Systems (MPWR) also are setting up in this bullish “W”-shaped pattern.

Micron Technology and Applied Materials both boast Composite Ratings of 97 out of a possible 99. The Composite Rating combines several IBD proprietary ratings into a single score. All-time stock winners often have a Composite Rating of at least 95 near the start of their big runs.

Lam Research has a strong 96 Composite Rating and Monolithic Power a 94. Marvell Technology has an OK 79 CR,  in large part due to previously spotty earnings, but recent earnings and profit estimates show an improving trend.

All three chip groups — Electronic-Semiconductor Equipment, Electronic-Semiconductor Manufacturing and Electronic-Semiconductor Fabless — were among the top 15 out of IBD’s 197 industries on Monday.

S&P 500 index futures were essentially flat vs. fair value. Dow Jones futures climbed 0.1%. Nasdaq 100 futures were flat.

The Double-Bottom Base

The double-bottom pattern tends to form in volatile markets, which we’ve seen over the past several weeks. You have one down leg, then the stock tries to rally but hits resistance and ends up pulling back to form a second down leg. The peak of the initial rally must be above the midpoint of the consolidation. The second down leg must undercut the first low of the consolidation, shaking out weak holders. The buy point is 10 cents above the peak in the middle of the W. Sometimes a double-bottom base will form a handle that could create a lower or alternative entry.

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Micron Technology

Micron stock rose 3.1% to 47.98, moving above its 47.08 buy point from a shallow double-bottom pattern. Volume was 2% below normal. You want to see volume rise at least 40%-50% above normal on a breakout as a sign that big institutions are adding to holdings.

The relative strength line, which tracks a stock’s performance vs. the S&P 500 index, is well off its levels from the left side of the consolidation, but it has moved above where it was at the middle of the “W,” thus providing some breakout confirmation. The RS line is the blue line in the charts below.

Look to see if the stock can power higher in strong volume, boost the RS line and indicating that mutual funds are buying in bulk.

Applied Materials

Applied Materials climbed as high as 58.99 intraday Monday, briefly clearing a 58.83 buy point. Shares closed up 3.2% at 58.81, two cents below that entry. Volume was just 4% above average. Look for the stock to close above the buy point in rapid trade.

Applied Materials, a leading chip-equipment maker, has surged since undercutting its 200-day line on Feb. 9. The RS line is not at a high, but is at its best levels in near three months.

Lam Research

Lam Research, another big chip-gear firm, rallied 2.8% to 198.43, continuing to rebound from its 50-day line. The stock is still a ways off from a 218.58 buy point.

Marvell Technology

Marvell Technology rose 0.9% to 23.46. The stock is in a shallow double-bottom base with a 24.31 buy point. Marvell is in the process of buying rival chipmaker Cavium (CAVM).

Monolithic Power Systems

Monolitich Power Systems climbed 1.5% to 119.82 on Monday, making its way toward a 124.54 buy point.


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Originally posted 2019-09-19 23:10:06.


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