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I continue to believe Applied Materials (AMAT) is showing signs of exhaustion. Last week the semi stock reached its 2012 highs near $14. The huge bull run that has been under way since the start of this year had pushed shares 25% higher. With last year's spike high now re-tested, AMAT may be headed for a healthy pullback. The overbought condition now in place will need to be worked off before heavy supply near $14 can be convincingly cleared. I am long the stock and have taken profits today. I will maintain a core position and expect to add following a pullback. The January high of $13 is the initial layer of support. A consolidation here would allow shares to rebuild its strength for a fresh rally leg.

The action in Texas Instruments (TXN) is very similar. The stock re-tested its 2012 double top earlier this month. This level, just above $34, is beginning to look rather heavy in the short term. Unlike Applied Materials, Texas Instruments is not as overbought but the momentum appears to be fading. Since the start of this year, the stock has rallied 10%. I expect a pullback here as well. Last week I sold some TXN but will keep 50% of the position and remain on the sidelines until a fade plays out. The $32.40 area is the initial layer of support. Just below is a supportive 50-day moving average....94 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.