Half traders’ shares are a nice place for investors, say two traders.
A search for high-momentum stocks that reached their 52-week highs and were worth their perhaps valuable valuations led Danielle Shay of Simpler Trading and Craig Johnson of Piper Sandler to the disc makers.
“Space has retreated quite significantly and a lot of it seems to me to have to do with the shortage of semiconductors,” Shay said on CNBC’s “Trading Nation” on Friday.
The VanEck Vectors Semiconductor ETF (SMH) is more than 8% lower than the 52-week high from February, and the industry expects the undersupply of chips to last for at least a few months.
“I think the semiconductors … have a lot of potential for growth here. If you look at the overall market space over the next few years, technology will just keep growing,” said Shay, her firm. director of options. “Nvidia is one of my favorites. I like Taiwan Semiconductor and I also like Advanced Micro Devices. All of these companies are being withdrawn at the moment, leading to some good access points for the long term.”
Nvidia was also a favorite of Johnson, Piper Sandler’s senior technical research analyst.
“Here’s a stock that was clearly one of the best names in the semiconductor space,” he said in the same interview, referring to a chart of the stock.
“It did very well before we started to see interest rates go up, and honestly for the last eight months, the stock has done nothing but go sideways,” Johnson said. “In my tech world, in the tech world it seems like a stock that just rests, consolidates and takes a breather after taking a very meaningful step.”
The chart analyst noted that the stock is about 14% lower than its February highs, saying it sees a “setback and correction”, not the beginning of a sharper decline.
“This is a stock that is expected to have more than 30% earnings growth,” he said. “So I think it’s one of those treasured stocks … that people should buy when it pulls back and tests the lower end of this trading range.”
However, do not buy everything at once, Johnson said.
“I do not think you have yet to build your full position here,” he said. “What I would like to see happen is if you come down to test it again, put on the position and if you confirm and start moving higher after testing the large area of support again, then I fill the rest of the position “So I’ll buy it two or three … if you come in and test that support area.”
Disclosure: Piper Sandler is a registered marketer for Nvidia.
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