From the desk of Steve Strazza @Sstrazza
When running through some scans this morning, we came across a stock that’s been on our radar from the Under the Hood universe.
You can read our most recent report here. It was just published Monday.
This is a quick follow-up to discuss a hot stock from a leading industry group… And of course, it’s presently offering us a skewed risk/reward. At the end of the day, that’s all we’re really looking for!
On the surface, this company is just an old LED light and radio-frequency device maker…
But, that’s not the whole story.
They actually manufacture and sell some of the most important inputs and materials for a variety of burgeoning growth industries.
While a seemingly favorable fundamental story is always nice to have as a potential catalyst, it is never enough. For us, it’s all about price.
Speaking of which, let’s dive in and see what the charts are telling us.
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This is the $11B semiconductor stock, Cree Inc $CREE:
As the world’s leading producer of silicon carbide, they are positioned to capitalize on THREE massive secular trends – the 5G revolution, cannabis production, and autonomous/electric vehicles:
But what we really care about is the fact the stock is pressing back toward its record highs from over two decades ago, and offering us a clearly defined risk level to trade against.
In the past several years, CREE has been steadily grinding its way back to the upper bounds of a massive consolidation. After appearing to resolve higher last year, the stock collapsed back toward its former dot-com bubble highs. Fast forward to today, and buyers look poised to reclaim this crucial level, trapping bears who got short beneath it in the process.
We’re seeing a lot of bull-hooks and shakeouts like this these days.
But the main thing to pay attention to in this chart is simply the 20-year base breakout.
Over the past few years, we’ve sat back and watched as one semiconductor after another have seemed to break out of these monster bases and reclaim their tech bubble highs.
And what have we learned about these bullish pattern resolutions over this time? They are often quite powerful and tend to be followed by major legs higher.
Put simply, we want to buy these breakouts just about every time!
So, let’s recap things quickly… We have a strong stock with potential tailwinds. We’re fishing the right reef as it’s in a strong industry. And it’s offering us a great risk/reward.
What more could we ask for in a long setup?
We want to own CREE above 100 with a target of 157 over the next 3-6 months.
We hoped you enjoyed this special follow-up edition!
Thanks for reading and please let us know if you have any questions.
Good Fishing!
Allstarcharts Team