Marvell Tech Breaks Out To New High With The Semiconductor ETF
Summary
- Technology is the best performing sector led by semiconductors.
- The iShares PHLX Semiconductor ETF has been setting all-time highs almost daily and now Marvell Tech has joined the momentum party.
- Since Marvel trades on technical momentum investors should ignore its elevated P/E ratio of 41.06 and puny dividend yield of 0.99%.
Semiconductor maker Marvell Technology Group (NASDAQ:MRVL) beat earnings estimates when the company reported results after the close on Thursday, March 8. The after-hours reaction was muted but positive results from most product segments caused the stock to breakout above my monthly pivot of $24.36 shortly after Friday's open of $24.21.
Friday morning's employment report showing that the nonfarm payrolls rose by 313,000 was a game-changer that led the tech-heavy Nasdaq Composite to a new all-time intraday high of 7,511 as of 11:00 AM. In a growing economy semiconductors lead as almost every product we buy contains computer chips, from our automobiles to our smallest handheld devices. An improving economy was the catalyst for the new highs for the iShares PHLX Semiconductor ETF (SOXX) and Marvell Tech.
Here's the daily chart for the SOXX
Courtesy of MetaStock Xenith
The SOXX was trading at $193.73 this morning and its all-time high as of 11:00 AM is $194.09. The ETF has a gain of 14.1% year to date and is up 18.7% from its correction low of $163.18 set on Feb 9. The ETF has been above its 50-day simple moving average since Feb. 14 providing the guidance to buy the SOXX at my quarterly pivot of $175.99. My monthly risky level is above the chart at $198.94, which is the level at which to reduce holdings.
The daily chart for Marvell
Courtesy of MetaStock Xenith
Marvell was trading at $24.73 this morning and its all-time high as of 11:00 AM is $25.18. The stock has a gain of 15.2% year to date and is up 21.4% from its correction low of $20.37 set on Feb 8.
Marvell has been above a ‘golden cross’ since April 20, 2016, which is not shown on the daily chart. On that date the stock could have been bought at $9.88. A ‘golden cross’ occurs when the 50-day simple moving average rises above the 200-day simple moving average which indicates that higher prices lie ahead. When trading above a ‘golden cross’ a strategy is to buy on weakness to the 200-day SMA. This was doable on Aug. 10 when the average was $15.35. The price-gap higher on Aug. 24 was on a positive reaction to earnings. The next earnings report was released on Nov. 28 and the stock failed to breakout to the upside. The horizontal line at $22.20 is my quarterly pivot. The line at the top of the chart is $24.36 is my monthly pivot and breakout level which is now the key level to hold on weakness.
The weekly chart for Marvell
Courtesy of MetaStock Xenith
The weekly chart for Marvell is positive with the stock above its five-week modified moving average of $23.09. The stock is also well above its 200-week simple moving average, also known as the ‘reversion to the mean’ now at $14.17, last tested during the week of Nov. 11, 2016 when the average was $12.39. Buying the stock at its ‘reversion to the mean’ is thus a prudent investment strategy. The 12x3x3 weekly slow stochastic reading ended is projected to end this week at 70.05 up from 64.74 on March 2.
Given these charts and analysis, my trading strategy is to buy weakness to my quarterly pivot of $22.20, and to reduce holdings when the SOXX ETF reaches its monthly risky level of $198.94. Aggressive buyers can add to positions at my monthly pivot of $24.36.
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