There has been no shortage of hot stocks coming from the Electronic Equipment industry over the last year. Just take a look at the Dow Jones US Electronic Equipment Index relative to the S&P 500:
Since 2016 the steady outperformance compared to the S&P 500 is obvious and this trend continues to look strong in my opinion. In breaking down the individual names in the industry, I was not surprised to see countless strong charts that have been and continue to be moving up aggressively. However, when I enter a trade, I always enter in an area where I can quickly determine where my stop will be and I can ensure if the trade moves against me my loss will be minimal. Although it varies by what I’m trading, typically I would not like my stop area to be more than 5% from my buy area. This sometimes makes it a little more challenging to find setups in a hot industry like this but I have found a few names that meet my criteria that I wanted to point out.
First, let’s take a look at II-VI, Inc. (IIVI). Below is the weekly chart. This stock has seen large gains since the middle of 2016. After a huge run through the beginning of 2017 it hit some resistance around $40 and pulled back to the 40 week (~200 day) moving average and $30 price support. It then resumed it’s run higher but again found resistance around this $40 area highlighted in yellow. It then made a shallower pullback (again to around the 40 week moving average) before moving back up and finally breaking above the $40 area that previously held it down. When former resistance breaks it tends to act as support going forward. As such, I would feel comfortable being long this stock as long as this level holds.
The weekly view is typically my starting view when analyzing charts. If I like what I see there, I then zoom in to the daily view to a closer look and to determine more specific entry and exit points. The daily chart of IIVI is shown below. This key area around $40 is highlighted and price is currently just above it. If this level holds, this is one I’d be interested in entering next week. My stop area would be a little below the yellow highlighted area to make sure it had a little room to handle volatility. I like this set up here.
One thing to keep in mind is that we are starting to get into earnings season. As such, it is wise to keep track of announcement dates of stocks you own or are watching. I typically don’t like to carry full positions into earnings announcements and am hesitant to enter a position as the date gets closer. IIVI will report earnings later this month and they have a recent history of exceeding expectations.
Next let’s take a look at Microvision, Inc. (MVIS). Where as IIVI is more of a breakout trade, this one has potential to be a trade buying a pullback into support and the longer-term trend. The weekly is shown below. This uptrend is easy to see with a series of higher lows and higher highs. Price has been coming down for the last month of so and is approaching the trend line and price support around the $2.40-$2.50 area. This is the area I’ll be watching for potential entry. When trading pullbacks in a longer term trend, I like to see and trade off of multiple areas of potential support.
Now let’s look at the daily for MVIS to zoom in on more recent action. You can see below how this yellow highlighted area has recently acted as resistance before turning to support. This is the area we’d want to ensure held if entering a long trade. Given the clearly defined risk presented here along with the longer-term uptrend, MVIS makes a good trade candidate in my opinion.
I have one more I wanted to point out. It is Zebra Technologies Corp. (ZBRA). This has a very similar look to IIVI on both the daily and weekly timeframes. I show the daily chart below. This stock is in an uptrend and the area around $108 acted as resistance until it was broken last week. If this level holds, I like this one as a long candidate with a stop just under this key price area.
These are three of the names I’m watching from this group. I think these prevent favorable risk / return characteristics and their odds of being successful are helped by being in a strong industry and sector. As always, I have no attachment to any of these names mentioned. If key price levels are broken, it’s time to move on.