NEW SELECTIONS
Today's stock selection is a member of the hot semiconductor sector and is
not only reasonably priced but has an interesting pending development.
1. Alliance Semiconductor Corp. (ALSC, $28.81, up $1) *** Long Selection
***
DISCUSSION
1. Alliance Semiconductor is a leading worldwide supplier of high
performance memory and memory intensive logic products. Alliance designs,
develops and markets its products to the desktop and portable computing,
networking, telecommunication, instrumentation, and consumer markets.
Alliance, through its venture arm Alliance Venture Management, also
invests in three venture funds. Alliance Ventures I focuses on investing
in networking and communication start-up companies; Alliance Ventures II
focuses on investing in internet start-up ventures; and Alliance Ventures
III focuses on emerging companies in the networking and communication
market areas.
Recently PMC-Sierra, Inc. (PMCS, $199) announced it agreed to acquire
Malleable Technologies, Inc. for 1.25 million shares. What does this have
to do with Alliance? It just so happens that Alliance Venture Management
will receive upon the completion of the merger, approximately 79,000
shares of PMC-Sierra, Inc. for its 7% interest in Malleable Technologies.
Alliance will report a gain based on the closing share price of PMCS on
the date of the merger. Based on the closing share price of PMCS on
Tuesday June 20, 2000, the estimated pretax gain from this transaction is
approximately $15 million.
Technically, Alliance shows a Buy signal from a Chaikin Level Peak trading
system and the MACD is on the verge of crossing back positively to the
upside. Pattern-wise, Alliance is near the end of a "cup-with-handle"
formation. The 52-week high is $30. There are a few ways of positioning
for an entry in Alliance. One way is to just buy ALSC while it is still
"in the handle" and wait for an ensuing breakout above $30. The other
would be to use a buy stop at $30.125 or $30.25 to make sure it breaks
through resistance at the old high of $30. Once ALSC moves beyond $30, it
will be in new territory and we'll look for a target near $36, a 20%
advance.
ACTION: Buy ALSC 10 to 30 minutes after the open with a limit price of
$29.50. Our target is $36 with an initial protective stop at $27.
For the CHART:
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