Today's Briefing.com Chip Related News: General Commentary - Have to give the sector/market credit for its resiliency in the face of negative news... Despite generally bearish economic news and weakness in a number of key Dow components, techs powered higher yet again. Gains were led by the Networking, Telecom, Wireless and Chip groups.
Networking and Telecom Equipment stocks took their cue from Alcatel (ALA)... Though company reported a sizeable loss for the quarter, it forecasted strong revenue growth in the current quarter and expressed confidence in making an operating profit in 2003... The news sparked a major rally in the networking/telecom equipment stocks, led by Lucent (LU 1.20 +19%), Nortel (NT 1.22 +12%), Tellabs (TLAB 7.94 +14%), Extreme Networks (EXTR 4.29 +11%), Ciena (CIEN 3.51 +9%) and Juniper Networks (JNPR 5.30 +6%).
Big gains also seen in the Wireless and Semiconductor industries, with both sector indices moving to their highest level in months. Winners included Nextel (NXTL 10.93 +8%), AT&T Wireless (AWE 6.46 +4%), Sprint PCS (PCS 3.19 +9%), Western Wireless (WWCA 3.09 +8%), Intel (INTC), Maxxim (MXIM 32.72 +11%), Lattice (LSCC 7.00 +11%), Teradyne (TER +9%), Xilinx (XLNX 19.62 +8%) and Novellus (NVLS 32.33 +7%)
Overall, the resiliency of the market to bad news, combined with the breadth and scope of the advance, suggests that there's more work to be done on the upside before the recovery losses steam. As Briefing.com has noted on several occasions over the past several sessions, we think most of the gains are behind us ,and that without a material change in the underlying fundamentals (which we haven't seen) the potential for additional upside is limited. Nevertheless, there's no denying that the tape is surprisingly strong right now. Okay to reduce exposure into such strength, but foolish to place aggressive bets against it.
Robert Walberg
Philadelphia Semiconductor Index (SOX) 301.29 +18.57: Bellwether semiconductor index testing major resistance in the 300 area... If it can hold between 302 and 272 over next few days, will be poised for run at 350 area.
3:41PM Amkor (AMKR) 3.26 -0.02: Despite last night's upside results of loss of $0.29, $0.06 better than Multex consensus, shares are flirting with negative territory in today's session. One of the highlights of report is shift to positive cash generation, which should alleviate some pressure on shares and concerns regarding significant debt, according to Thomas Weisel, who thinks current levels offer positive risk/reward profile; reiterates Buy rating. Although encouraged with AMKR's efforts in improving margins and profitability prospects, Soundview Technology maintains Neutral rating until better visibility on demand and profitability are established. CSFB is pleased by AMKR's cash flow positive position, but based on lack of near-term catalysts thinks stock is fairly valued.
3:27PM MU breaks to lows of day; rumor of spot secondary 15.70 -0.39:
2:57PM Nasdaq maintains posture above 100-day simple moving average : -- Technical -- Index continues to maintain a posture above its 100-day simple moving average at 1318. Continue to look for modest initial resistance at congestion around 1325 and 1331 followed by more significant overhead in the range of 1,347 to 1,350. To the downside, watch for initial support at 1318 followed by subsequent support at 1311 and a more significant floor in the area of 1300.
2:51PM Maxim Integrated (MXIM) 32.40 +2.97: Despite Q103 revenues reported last night being in low end of guidance, company's EPS was in-line with expectations at $0.22; just like earnings, analysts' reactions to company's progress are mixed. CSFB views MXIM as one of best ideas for relative outperformance in semis and analog; maintains Outperform rating; Soundview Technology suggests to buy on pullbacks. Morgan Stanley, on the other hand, expects mixed news flow in analog sector and limited visibility in Q2 to limit stock's performance; while Thomas Weisel views shares, trading at pre-bubble averages, as expensive. Despite mixed commentary from analysts, market is reacting positively to last night's earnings, with shares 10% in the green.
1:55PM Dell Computer (DELL) 28.86 +0.20: Despite stock's recent 20% advance, Banc of America Securities raises price target of Buy-rated tech giant to $34 from $30 in light of its ability to generate consistent free cash flow. Company's recent announcements of entry into channel and low-end storage products, new geographies, like Asia, and upcoming launches of PDAs and printers are opportunities for expansion of profitably, market share, and diversification of revenue. Furthermore, yesterday DELL and EMC introduced new product to be manufactured by DELL, which elevates DELL's role in partnership with EMC and significantly broadens addressable customer base for products. Shares are 0.7% up on upbeat note and new product development.
11:29AM IBM sees economy, not tech market bottoming (IBM) 78.65 +1.91: -- Update -- Dow Jones apparently running a correction that IBM's CEO sees the economy bottoming out, not the technology market.
10:53AM Microchip rises on reports of upbeat 2004 outlook (MCHP) 24.05 +1.39: Being told that at the Prudential Technology Conference company is raising its fiscal yr 2004 earnings guidance to $0.92 from $0.84 and revenue forecast to $850 mln from $801 mln. The current Multex consensus for '04 is $0.85/$801.7 mln. Comments come one week after co's in-line Q2 earnings report. (Briefing.com is hearing this information from a 3rd-party).
10:47AM Nasdaq tests 100-day simple moving average : -- Technical -- Index has edged above its 100-day simple moving average at 1318. Look for modest initial resistance at congestion around 1325 and 1331 followed by additional overhead in the range of 1,347 to 1,350. To the downside, watch for initial support at 1311 followed by a more significant floor in the area of 1300.
10:24AM Technical Levels : In our last review of the Nasdaq, we pointed to the 1,300 area as a relatively good candidate for near-term support. Obviously the 1,300 level is a nice round number. Yet it also approximates a 62% retracement of the prior leg higher, and happens to match up relatively well with congestion over the past several months. As it turns out, the index did indeed find support at 1,300 finishing yesterday's session precisely on that mark.
So from a strictly technical perspective, the markets appear to be acting reasonably well. Following the Nasdaq's initial 20% surge off multi-year lows, the subsequent sell pressure has been relatively flat. At this point, the index has strung together eight consecutive sessions in which its closing level ranged between 1,288 and 1,331. Also note that, with one exception, each of those prior eight closes fell between its 50-day simple moving average and its 100-day simple moving average. Just for the record, that one exception happened to be a false break above its 100-day sma.
What this all suggests is the index is in the process of working through a consolidative phase. Now any period of consolidation carries the prospect of a break in either direction -- higher or lower. Yet coming off the powerful 20% initial move, the more likely outcome is that this consolidatitve phase will ultimately end with additional upside. Once again, this is probably more a matter of when the break higher occurs rather than if it occurs.
Yet while we all wait out this period of consolidation, we continue to have the more immediate issue of the near-term technical levels. To the upside, look for notable initial resistance in the area of 1,318 which represents the index' 100-day simple moving average and also matches up with near-term congestion.
Remember, over the prior eight sessions, the Nasdaq has only edged its 100-day simple moving average once on a closing basis -- that happened to be last Friday. Before that, you would have to go back to March of this year to find the last time the Nasdaq was positioned above its 100-day sma. So a clean closing break of this average would be a notable technical development. It would almost certainly improve the near-term bias and could very well contribute to a resolution of the present consolidatitve phase.
At any rate, resistance at 1,318 is followed by additional overhead at 1,331 which represents the closing high on the current leg higher. If the Nasdaq should successfully navigate those two levels, look for subsequent resistance at congestion around 1,347 to 1,350.
To the downside, there are three primary areas to watch for support. The first is the aforementioned 1,300 level which approximates a 62% retracement of the prior leg higher, and also matches up well with congestion. That's followed by a subsequent floor in the range of 1,282 to 1,287 which approximates the lower end of the current consolidative channel. Those two areas leave our final, and most solid, support in the range of 1,264 to 1,269 -- this area brackets the Nasdaq's 50-day simple moving average as well as its 20-day exponential moving average and also happens to encompass a 50% retracement of the prior leg higher. -- Mike Ashbaugh, Briefing.com
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