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Top Semiconductor Stocks To Watch This Week To Lead A Market Rebound
March 30 2020 - Why AMD, Nvidia These Chip Stocks Could Lead The Next Market Rally By Investors Business Daily
Nvidia (NVDA), Advanced Micro Devices (AMD), Taiwan Semiconductor (TSM), Inphi (IPHI) and ASML Holding (ASML) are among chip stocks making strong moves as the coronavirus stock market crash wraps up another week.
The semiconductor quintet is reclaiming or seeking support at key levels and they have either formed bases or are about to do so. Nvidia stock, AMD stock, Taiwan Semiconductor stock, Inphi stock and ASML stock are all leaders, with relative strength lines at or near highs. That means these chip stocks are outperforming the S&P 500 index. Stock Market Correction: Watch The RS Line
The relative strength line is a quick way to spot winners in any market — up or down. Stocks with rising RS lines in a stock market correction are likely to lead the next uptrend. But keep your watchlists fresh. A stock that looks great earlier in a correction won't necessarily continue to outperform.
The Relative Strength At New High list highlights quality names with strong RS lines. IBD's stock research platform MarketSmith has a screening tool that identifies stocks with RS lines making new highs.
Bear in mind that a stock market correction is time better spent building watchlists than buying stocks. Even stronger names might have damaged charts. But some of the biggest gains happen in the weeks after a market correction. Here's why these five semiconductor stocks could lead a coronavirus market rally.
IBD 50 stock Nvidia fell 1.75% to 252.73 on Friday but leapt 23% for the week, rebounding off the 40-week line and nearly retaking its 10-week line. The chip giant needs a few more days to form a base, so it's still early for a buy point.
Nvidia stock surged 17% on March 24, as a Wall Street analyst said the graphics chipmaker is providing critical artificial intelligence technology to scientists fighting the coronavirus pandemic.
In the coronavirus stock market crash, the RS line for Nvidia stock has risen to its best level in more than a year, according to MarketSmith analysis. The RS line, measuring a stock's performance against the S&P 500, is the blue line in the charts shown.
Nvidia earns an Earnings Per Share Rating of 93 out of 99. The chipmaker returned to earnings growth in its latest quarter after four consecutive down quarters. Analysts expect Nvidia earnings per share to swell 32% in all of fiscal 2021, then rise 19% in 2022. That would be above the three-year growth rate of 18%, the IBD Stock Checkup tool shows.
AMD stock gave up 1.9% to 46.58 on Friday, but gained 17.6% on the week. Shares of this chip giant are also looking to top the 10-week line after bouncing off the 40-week last week. As of Friday's close, AMD stock has a cup base with a 59.37 buy point. The base is deep and has formed under the 10-week line, but the 38% decline seems OK given the current bear market. The RS line for AMD stock has bolted to new highs, a sign of outperformance in the coronavirus correction.
AMD stock has an EPS rating of 73, but earnings growth has accelerated the past three quarters. Analysts expect AMD earnings per share to vault 72% in all of 2020, then jump 45% in 2021. That would be below the three-year EPS growth rate of 190%.
Taiwan Semiconductor Stock
Taiwan Semiconductor stock gave up 6% to 46.84 Friday, but still rallied 5% on the week. Shares are working on a base with a 60.74 buy point. But the chip stock is meeting resistance at the 40-week line and it's well below the 10-week line.
The RS line for Taiwan Semiconductor stock has come off recent highs.
Taiwan Semi stock has an EPS Rating of 78. But both TSM earnings per share and sales have accelerated for three quarters. Wall Street expects EPS to increase 20% in all of 2020 and a further 12% in 2021, after declines the prior two years.
Taiwan Semiconductor is the world's largest chip foundry, making semiconductors for Apple (AAPL), AMD, Nvidia, Inphi and many others.
Inphi stock fell 2.6% to 74.28 on Friday, but surged 27.8% for the week. Shares are working on a cup base with a 93.68 buy point. But the base looks choppy and Inphi stock is meeting resistance at the 10-week line after shooting above the 40-week line.
The RS line for Inphi stock recently bolted to a new high and remains near there despite a slight dip recently. The EPS Rating is 76, a sign of slowing growth in recent quarters. But Wall Street expects a rebound, with Inphi earnings per share increasing 36% in all of 2020 and jumping a further 50% in 2021.
ASML stock sank 8.4% to 252.62 Friday but rose 17% on the week. Shares remain below the 10- and 40-week lines. The chip-equipment giant now has a V-shaped cup base with a 319.32 buy point.
The RS line has come off new highs. ASML has an EPS Rating of 85. Like Nvidia, ASML returned to growth in its latest quarter after a string of down quarters. Analysts expect EPS to rise 21.5% in all of 2020 and a further 32% in 2021. That would be above the three-year EPS growth rate of 18%.
Top Stocks To Buy And Watch
Nvidia stock and AMD stock also have perfect IBD Composite Ratings of 99. Inphi stock follows with a CR of 98, ASML stock has a 97 and Taiwan Semiconductor stock has a 95.
Top stocks tend to have a Composite Rating of 95 or better at the start of their big price runs. The rating measures a stock's strength on key fundamentals as well as technicals.
Investors should be always be on the lookout for top stocks like Nvidia stock to add to their watchlists — and eventually their portfolios. To find the best stocks to buy and watch, check out IBD's Stock Lists page. More stock ideas can be found on our Leaderboard and MarketSmith platforms.
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