ETF Outlook: Powershares Dynamic Semiconductors ETF (PSI)


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Every Wednesday, Marc Chaikin applies his groundbreaking analysis to an ETF or a sector. Today, he looks at Powershares Dynamic Semiconductors ETF (PSI).

The Semiconductor group has been outperforming both the Technology sector and the overall market. The Semiconductor ETF with the best ratio of bullish to bearish Chaikin Power Gauge ratings is the Powershares Dynamic Semiconductors ETF (PSI). It has 13 bullish rated stocks vs. only 3 stocks with bearish Power Gauge ratings – see Chaikin Power Bar below:

With the strength in the Semiconductor group likely to continue, finding the strongest stocks in a Semiconductor ETF like PSI is an excellent way to invest in market-leading stocks which are likely to outperform the market and the ETF itself.

The Portfolio Health Check is an excellent tool to help zero in on the strongest stocks in an outperforming ETF like the Powershares Semiconductors ETF (PSI). By looking at the individual component stocks through the lens of the 20 factor Chaikin Power Gauge rating, you can easily find the stocks in this outperforming ETF with the strongest potential over the next 3-6 months. These are the stocks to consider buying as this strong group has now seen renewed strength in Intel (INTC), the industry leader, with a bullish Power Gauge rating, which beat analyst estimates when it reported earnings after the close on Tuesday 7/15.

The Chaikin Power Grid (see below) maps stocks and industry groups from strong to weak so you can easily determine the best and worst stocks in any ETF. To find the weakest stocks in the PSI, we look to the upper left quadrant of the Power Grid (weak Power Gauge stocks) where we find stocks with the poorest potential for price gains over the next 3-6 months. Two stocks in the PSI ETF had Power Gauge ratings which turned bearish this week: Freescale Semiconductor (FSL) and Linear Tec (LLTC). If you own these stocks you should consider selling them and swapping into stronger names in this market-leading ETF; see Potential Swaps ideas below:

Over time, strong stocks in strong industry groups will outperform weak stocks in weak groups.

Two stocks which stand out as potential buy candidates are Intel (INTC) which reported earnings on Tuesday, July 16 after the close and is spiking up to new highs after beating analyst estimates and providing an upbeat picture for the group, and Skyworks Solutions (SWKS) which makes analog chips for mobile devices and reports earnings after the close on Thursday, July 17. SKWS has beaten analyst estimates in each of the past 8 quarters, and on June 3rd raised guidance for the quarter, which will be reported July 17, and for the full year 2014.

Other buy candidates include Nvidia (NVDA) and Cirrus Logic (CRUS).


Chaikin Power Gauge rating

Chaikin Portfolio Health Check

Chaikin Stock Tools

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs , Investing Ideas , Technology

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