More Cautious on Key Semis

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.

Applied Materials (AMAT) Source: TradeStation View Chart » View in New Window »

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.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.