CISCO SCORES BULLISH BREAKOUT -- ALTERA AND TEXAS INSTRUMENTS LEAD STRONG SOX BOUNCE -- TAIWAN ETF REGAINS 50-DAY LINE
CISCO BREAKS OUT ON BIG VOLUME ... Although most technology stocks rallied today, Cisco was the chart standout. Chart 1 shows why. The big networker broke through its summer 2005 highs and it's done so on sharply higher volume. That's a bullish combination. Its relative strength line has jumped sharply versus the S&P 500 since the start of the year. Impressive as the daily chart is, the weekly chart is even moreso. The weekly bars in Chart 2 show the last two years of Cisco action. It's a classic case of a bullish turnaround. The stock dropped from the start of 2004 to the start of 2005. It bottomed in the spring of 2005 near 17 and traded sideways for the balance of that year. It retested that low successfully in October which set up a possible "double bottom" reversal pattern. This week's upside move has broken through its mid-2005 peak near 20 and completed its yearlong bottoming formation. That bottom yields as initial upside target to 23 with a shot at its mid-2004 peak at 24. Chart 2 shows Cisco's relative strength ratio breaking a two-year down trendline.
Chart 1
Chart 2
SOX LEADS DAY'S TECH RALLY ... Today's 4% gain made the Semiconductor (SOX) Index the day's strongest group. Chart 3 shows the SOX bouncing off its 50-day moving average. Chart 4 shows the Semiconductor Holders (SMH) climbing back over its 50-day line on rising volume. [Because of its heavy weighting in Intel, the SMH has underperformed the SOX lately]. Two of the day's chip leaders were were Altera and Texas Instruments.
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ALTERA AND TXN ARE PERCENTAGE LEADERS ... Altera's 6% gain made it one of the day's chip leaders. The daily chart shows the stock gapping over 21 for the first time since last summer on very heavy volume. An 8% gain made Texas Instruments the day's chip leader. Chart 6 shows TXN jumping over its 50-day average and its February high. The stock has been an underperformer since last September. That may be changing.
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TAIWAN ISHARES REGAIN 50-DAY LINE... A bullish day in semiconductors invariably results in a bullish day in Asia. That's especially true of Taiwan iShares (EWT) which have a heavy weighting in chip stocks. Today's 3% gain in the EWT made it one of the day's strongest global ETFs. More importantly, it's climbed back over its 50-day moving average. Global stock markets regained all or most of yesterday's Google-led price decline. The Nasdaq led the U.S. market lower yesterday and higher today. It got a lot of help from Cisco and the chip stocks. It's always good for the market when technology stocks are rallying.
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