Tuesday, June 16, 2009 3:04:13 AM EDT Betting On A Bottom-TEST TEST by James Brown Click here to email James Brown

Is The Bottom In for Semiconductors?

INTC $16.31 -0.04 -- Intel Corp.

Why We Like It:
Predictions for the semiconductor industry continue to forecast declining revenues for 2009. Yet TXN and QCOM recently raised their earnings guidance while TSM and INTC are claiming that the bottom is behind us. Shares of INTC appear to have bottomed with a bullish double bottom at the November 2008 and March 2009 lows. More recently INTC has found very strong support at $15.00. If the worst for the economy really is behind us then six to twelve months from now INTC should be a lot higher.

I am suggesting bullish LEAPS positions now in the $17-15 zone. We will use a relatively tight stop loss at 14.40. More aggressive traders may want to give INTC more room but if it closes under $15.00 we'll probably want to exit anyway. Our long-term target is the $24-26 zone.

FYI: Shares of Intel don't move very fast. Readers might want to consider turning this play into a calendar spread to further maximize your gains.

Company Info:

Intel (NASDAQ: INTC), the world leader in silicon innovation, develops technologies, products and initiatives to continually advance how people work and live. (source: company press release or website)

Use the 2011 January calls (Entry point - now, at current levels)

BUY CALL 2011 JAN $20.00 strike (VNL-AD) current ask $1.36

Chart of INTC: