Analysis: NUE AMD SWKS

Chris Versace and Bob Lang discuss infrastructure, Nucor (NUE) , Advanced Micro Devices (AMD) , Skyworks Solutions (SWKS) and much more.

CHRIS VERSACE: Good morning Action Alerts PLUS members. And Happy Monday. I'm Chris Versace. And joining me is Bob Lang. Katherine Ross has the day off. Bob, lots going on today in the markets. Let's jump right to it. What are the technicals telling you?

BOB LANG: Another update, Chris. New all-time highs on a couple of the indices. And what we've noticed is the past few weeks the market action has been super strong. We've seen good price action, strong volume. Technicals are moving in favor of the bulls here. So that has me a little bit concerned, a little bit worried.

As a contrarian investor and trader, I don't like to see everybody tilted on one side of the boat because what ends up happening is that boat's going to tip over. So I'm a little bit cautious right here, Chris. We've been pretty far extended away from the moving averages. The ones that I look at are the 10- and the 20-day moving averages, specifically the 20, which is about a month's worth of action.

We're about 3 and 1/2% away from that 20-day moving average now as we speak today, as the markets are rallying up again towards new highs. We'll see a little bit of a pullback. Of course, that 20-day moving average is moving up steep at a really high pace right now. We'll see some pullback here, 2%, 3%. It'll feel pretty bad.

But still, I think that uptrend is still intact. And even as we pull back, we're in a seasonally strong period right now. We could really rally nicely into the end of the year.

CHRIS VERSACE: Well, I think you're right, Bob. Typically, when we see such pronounced moves in the market, some say it gets a little overextended. Some will say we need a pause to refresh. And September quarter earnings came in significantly better than people were fearing. I think like 90% of the S&P 500 constituents have reported, and the vast majority of them have reported better-than-expected revenue and EPS. We've also had some other positive developments, where it sounds like President Biden is discussing tapping the Strategic Petroleum Reserve to help out with oil prices. We're hearing the energy crunch in China might be abating. And the worst of the supply chain might possibly be behind us.

Now, Bob, late Friday, the House passed the bipartisan infrastructure bill. So let's talk about that a little bit. What are you seeing as it relates to portfolio holding at Nucor?

BOB LANG: Well, that's one of the big primary beneficiaries of this infrastructure bill, Chris. And I think Nucor, being a purely US steel company-- they do a lot of exporting as well, too, but purely sell a lot of their steel into companies in the United States-- ran up earlier this year, in late summer or early spring, on the anticipation that this bill is going to get passed earlier. And then it faltered a little bit, along with some of the other steel names and some of the commodity-producing companies.

But now I put a chart together for the folks here. The stock, when we spoke about it last week, I was looking for the stock to breakout above $115. And we've gapped right through it this morning. We're not near the highs of the session. We're actually kind of trading near the lows. But I think a lot of excitement, a lot of enthusiasm is being let out, a little air being led out of the balloon here.

But the stock of it kind of holds around this one $115, $116 area. I see some positiveness here with the charts and with the technical starting to turn right back up to bullish again. And I'll tell you what. We could get a run back up to those old highs, $127, $128, over the next few weeks. I think there's going to be a lot of interest in a name like Nucor. And I'm pretty happy where we have it in the portfolio.

CHRIS VERSACE: Well, I agree, Bob. There's been a lot of fits and starts with this infrastructure bill. And it's not quite anywhere near the original size. But when we think about Nucor and what its steel products go into-- bridges, tunnels, roads, airports-- there is going to be some incremental demand for their products. And remember, steel prices are at very nice levels here. So the 1-2 combination between volume and favorable pricing, that should be a very good driver for revenue in the coming quarters.

But Bob, let's move on to semiconductors. We'll be eyeing news out of AMD's Accelerated Data Center Premiere event and Applied Materials competitor, Lam Research's Investor Day. Wow, I'm glad I got through that.

BOB LANG: You nailed it.

CHRIS VERSACE: Anything you'll be looking for, particular, in either AMD, Bob, or on Applied Materials?

BOB LANG: Well, AMD just reached a milestone high today, went above $140 again, I think there's a little thin air up there, Chris. And I think the last few of the buyers are coming in here. I don't see a lot of volume, a lot of turnover at prices at this level. So that's a little bit cautionary for me.

I think the fact that we talked last week on the call-- on the monthly call-- about possibly pulling a little bit of our chips off the table on that name is probably a smart idea. We added Applied Materials, of course, a couple of weeks ago. And we added a little bit more of it. And that stock has just been a powerhouse over the past week, week and a half. Probably a lot-- it's done a lot a more upside than we had expected, of course, in such a short period of time.

But again, here's another name that's going to report earnings next week. And we think even a little bit of a pullback here would probably be a good opportunity to add some more shares. But we're very happy and pleased with both these names.

CHRIS VERSACE: Yeah. No, I think you're right on that, Bob. Particularly with AMD, in particular today, we're really going to want to understand the inroads they're making on the data center front. That's one of the real extra drivers for that business.

Remember, they're probably taking share from Intel, as is in NVIDIA. And again, with regard to NVIDIA and data centers, we'll be reading into comments from Applied-- sorry, from AMD as well. With Applied, I think you're absolutely right, Bob. This thing has been a monster out of the gate.

We could see some fade here. But by no means does that mean that we're anywhere close to throwing in the towel with Applied Materials. We keep hearing about chip shortages, which are getting better. But the reality is that there's going to be a continuous build cycle as we not only continue to deliver on 5G, AI, AR, VR, big data, and a host of other applications. Applied is going to be one that we're going to hold, I think, for some time, Bob.

Now, we've also been getting some subscriber questions. Bob, there was some turmoil last week with the shares of Skyworks. And this morning we actually chipped our way further into that position using the pullback to our advantage. What do you see on Skyworks shares from a technical perspective?

BOB LANG: Yeah. So, as we talked on the call last week, we thought that buying at the level of around $160, $162 was a good move. It had double bottomed from back in the spring. And currently right now we see the stock is moving up nicely above $164, $165 a share.

Again, the stock still needs to pick up some institutional sponsorship down here. And once it does, we could see a good move above $175, which was the recent high from the early part of November. Again, these things take a little bit of time, Chris. And I think at the moment we added the shares, we were looking to maybe out a little bit more. And we know what our boundaries are.

The boundaries are down about below $160. And I think the stock has certainly got some room to get back to the summer highs. That's about $197, $198. And that would be a nice percentage move from where we added, probably a good 20%, 25%.

So I like where the name is right now. I do like the name. They're out here where I live in the Boston area, Skyworks is. And think once we get a little bit of more activity, a little bit more turnover on the stock, we can make a run at that 200-day moving average, which is going to be another prominent area of resistance, about $178. But I think overall, I think technically the stock is ready to run.

CHRIS VERSACE: Yeah. I'm a big fan of the RF semiconductor space, particularly Skyworks, in particular. I like the revenue multiplier that they're getting as dollar content increases per device with 5G. And when you compare/contrast with Skyworks, which not only delivered great September quarter results and guided sequentially higher-- and you can contrast that with one of their competitors, Qorvo, that did beat September quarter expectations but guided the current quarter lower, so sequentially down. I think that really tells you a lot about what's going on in the space and how some companies are able to weather the supply chain issues far better than others.

Remember, Qualcomm, too, also gave us a big vote of confidence on Skyworks, with their very robust guidance for the current quarter as well. So, yeah, we used the pullback between Friday and early this morning to get back into Skyworks shares and build out our position right around our cost basis. And the price target remains around $210. Well, Bob, thank you for all of that. And, subscribers, thank you for joining us. We'll be back tomorrow.