Semiconductors & Miscellaneous Trading Comments

I see a lot of discussion & buzz about AMD today in the trading room today & just wanted to share the fact that I wouldn't underestimate just how far the semis, or really any stock or sector for that matter, can potentially fall (or rise) from here. Given; the primary trend is the broad market is still bullish & far from confirming any primary trend change (from bullish to bearish). However, using the term "far from" can be viewed, or actually realized in one of two ways (or any combination of the two): Time or Price.

By time, that would assume that the markets gradually move lower in the coming months+, slowly & periodically triggering various sell signals such bearish crossovers of various key moving average pairs (aka- a death cross); breakdowns below key uptrend lines & price support levels; various intermediate & long-term trend indicators flipping from bullish to bearish; etc..

By price, I am referring to the possibility of a very sharp & powerful sell-off in the equity markets that could potentially trigger numerous intermediate & longer-term sell signals in relatively short order. The point that I'm trying to impress is to be flexible & always be prepared for the unexpected or a sudden shift in the current trend and outlook for the market or a particular stock or sector for that matter.

Circling back to my original comment above regarding just how much downside potential there could be in the semiconductor stocks, and with the recent buzz within the trading room on AMD today with the stock trading down over 6% right now (with dovetails with this comment that I posted in the trading room just before the close yesterday: "11.00 is key support for AMD which would be a VERY objective short entry IMO, if taken out impulsively. AMD trading at 11.24 with 13 minutes to closing bell now so to be continued tomorrow…"), I wanted to re-post this AMD Analysis & General Trading Tips video that was published just over a month ago which I believe makes a fairly compelling case that AMD (along with some other semiconductor stocks) has the potential to fall 50% or more in the coming months+ as I there are quite a few new or even existing members to the site that might have not had the opportunity to view that video.

Whether or not AMD drops 10%, 50% or more (or reverses today & continues on to new highs from here for that matter), the salient point that I would like to drive home is every so often, the fundamentals & technicals align on a stock, sector, commodities, broad market, etc.. where it appears a very significant trend change & bull or bear market is quite possible. While my primary trading style as well as the majority of trades on Right Side Of The Chart are swing trades, with holding periods typically measured in weeks or months, occasionally the opportunity to position for a longer-term trend trade lasting many months or even years will present itself.

Should that be the case with AMD or any other stock, ETF, commodity, etc..., one must decide whether they want to position to attempt to capture the bulk of the trend, take the quick buck (swing trade or pullback trade) or a combination of both, which is what I will often do. That combination of swing trading within a primary trend entails going long (or short) inline with the primary trend (bullish or bearish), while booking profits strategically at key target (resistance or support) levels in which a reaction is very likely. In many cases I will reverse the trade: e.g.- close a short position, like AMD, at a key price target & if the chart indicate that a substantial counter-trend rally is likely, then I will close the short & open a long position at or around that same time in order to trade the bounce & then recycle back into a short position for the next leg down.

I realize that my flexible trading style (primary swing trader, occasional day trader & trend trader as well as an investor in my long-term (retirement) accounts) might be confusing or overwhelming to some, especially considering the fact that I'm usually trading both long & short positions at the same time regardless of the primary trend in the market. The reason that I trade both long & short is because the financial markets are made up of many different & unique asset classes such as stocks, bonds, precious metals, various commodities, currencies, etc... any of which can and will be in their own bull or bear markets at any point in time regardless of what "the stock market" is doing. As always, please don't hesitate to contact me if you have any questions or would like clarification on a trade or analysis that I have posted.

-Randy Phinney

Jan 12, 2017 10:47am|Categories: Equity Market Analysis, Trading Tips|Comments Off on Semiconductors & Miscellaneous Trading Comments