 folks, welcome to a contrarian commentary with regard to the semiconductor global chip shortage. The first question that we're going to want to answer is, is this for real? Out of the blue comes a crisis that all of a sudden we have a global chip shortage. How did this happen? And is this global chip shortage, in air quotes, simply a pump and dump on the part of hedge funds in a market that is extremely expensive? Or do we in fact have a global chip shortage? I've done a lot of research on this. So what we're going to be talking about is global chip supply shortage, factor fiction, we're going to bust the myth. And I'm going to tell you how I was able to validate whether there is or is not a global chip shortage. Then we're going to segue over into market valuation because some of the strategies we're going to be talking about today with different sectors and different stocks are momentum trades. And we need to be very well aware that the semiconductor sector has had a tremendous bull run. So we need to go into any trade understanding where the market is in terms of valuation on a historical basis. Then we're going to talk about strategies, momentum trades, blue trip investments, and then off the radar trades, some of which I think you're going to find surprising. We'll talk about my favorite sectors and the stocks within those sectors. And we'll look at both the fundamentals and do some technical analysis. So let's get to it. Now to the question of as to whether or not there is a semiconductor shortage, there's little doubt, especially when it relates to the automotive industry, there's little doubt that there is in fact a chip shortage. Case in point, Wall Street Journal, auto demand rebounded from coronavirus slowdown for GM, VW and others, but the industry misjudged supply lines as semiconductors that control engines, airbags and touch screens. Is this story a plant or is it for real? Well, the way we validate things like this is that we look for who's taking the hit and are they doing it voluntarily. And in this case here, in December, VW announced it would stop production of best-selling brands such as Audi and its namesake VW brand at plants in Europe, China and North America. Audi citing a chip shortage furloughed 10,000 factory workers for the first time since the spring lockdown. So VW is putting their money where their mouth is. And along those same lines, Ford, this is from Motor Trend, Ford is forced to temporarily cut production at two plants in the United States that make the profitable 2021 Ford F-150 full-size pickup because of the global shortage of semiconductor chips. This is their cash cow this vehicle year. So for Ford to temporarily cut production, it's a huge decision not taking lightly because it certainly will adversely impact their next quarterly reports. So in my analysis of the chip shortage and who's going to benefit from this shortage, I've narrowed it down to five areas of focus that I want to focus on in terms of industry and sector. The first one, the semiconductor equipment makers. Why? Because there's such a shortage of supply companies are going to need to expand production. This PR Newswire off of CISION dated the 15th of December. Global sales of semiconductor manufacturing equipment by original equipment manufacturers are projected to increase 16% compared to 59.6 billion in 2019 and register a new record of 68.9 billion in 2020. Semi announced today in releasing its year end total semiconductor equipment forecast. The growth is expected to continue with the global semiconductor manufacturing equipment market reaching 71.9 billion in 2021 and 76.1 billion in 2022. Now there are a lot of good players in this sector, but the one that we're going to settle on because this is a momentum trade is going to be ACM research, ticker symbol ACMR. This is a best of breed using the fundamental data and technical data provided by Investors Business Daily. The shares are in a confirmed uptrend. They are number one out of 197 names in this group. Their relative strength rating A, their three year earnings per share growth rate 142%, three year growth rate 61%, annual return on equity. This is a measure of the effectiveness of management 30% outstanding. Now what we want to do is we want to take a look at the chart. Let's talk technicals here and the charting software that we're going to be using is going to be brought to you by our friends over at Trendspider. Folks, Trendspider is the next generation in automated technical analysis. You need to be able to speed up your technical analysis because most people have day job, but you must be able to improve your accuracy at the same time. Use their trade alerts to time your trades with precision. Find winning chart setups with their market scanner and those scanners are pre-built. I use them all the time. They're in there for you. You don't have to calculate them and you reduce costly trading mistakes when you use Trendspider by removing bias, emotion, social influence, FOMO, fear of missing out and other costly analytical mistakes from your routine. Automate the grunt work folks and become a far more effective trader. They have a demo. You could take a tour of the product. They have a seven day free trial offer. Use the link below, 35% off. That's the best price on the web. So again, Trendspider, 35% off, best price on the web. Let's take a look at Trendspider and do some analysis of ACM research. So what we'd like to do here is we'd like to do a top-down approach, multi-time frame analysis to our technical analysis beginning with a monthly chart. And as you can see here on this monthly chart, ACMR broke out of a monthly consolidation here back in January. We had a continuation move up higher so far this month in February. RSI validating volume coming in on par with last month. We'd like to see that move up higher weekly chart. Now in a weekly timeframe, I worry about two things. One, we are trading above the third standard deviation Bollinger Band. Two, do we have resistance above? And to identify if we have resistance above, we're going to use the automated trend lines. First, we'll try the weekly click of a button there we're at. That's exactly where we would stop up at resistance. This is the value of automated technical analysis. Click of a button off on. This keeps you out of trouble. And to that, we're trading above the third standard deviation Bollinger Band. So does this mean we walk away from this trade? No, we approach it with a bit more strategy. I'm predicting a pullback here. The question is where is a good risk reward entry point? Simple. I like two separate areas on ACMR. One is if we pull back and do a retest of the breakout point. And you may get that if you get some market weakness, a little bit of a shakeout. Okay, so our alert's going to be set when we retrace and hit what was resistance back here should now act as support. We want to know when it touches, bounces, ACMR, retest of breakout point, best of breed semi-manufacturing reminder to myself. We'll keep this active for a couple of weeks. Another area where we may get some support is here. What if we only get a light pullback? I like where we had resistance here. And we have a volume shelf here at 107 spot five two. I'm going to create an alert. I want to know if we break through, touch, bounce. Why do I want to know if we break through? Well, I can anticipate that we may, if we close down below 107 spot five two, come down to that secondary support level and our alerts are set. We're good to go here. RSI is rising. Good volume last week on the breakout daily chart. Much is what we saw on the weekly chart. We're very extended here. Expect a retracement trend spiders picking up a support level here at 116.76. All right. So what I've done here is I've set up another alert. ACM support hit daily timeframe three of three. Okay. What does that mean? It means that this is a note to myself that I have two other support levels below here. This is not my preferred support level that however is, is that it may just hold. So we need to be open-minded and we'll keep this active for 15 days and we're good to go. This will provide us a good risk to reward entry point by showing patients and waiting for a pullback. You can see here all my alerts are set to the right. The next sector that I believe is going to do very, very well is the EV sector. This is off of Yahoo Finance. EV sales may rise 50% in 2021 and I'll link to all these articles in the video description area below. So, so don't feel the need to do a print screen or try to capture all this reading right now. You can always read it, read it at your leisure by clicking on the links below. Now our favorite stock in this sector, this is a Momentum Trade Alpha and Omega semiconductor. This is best of breed. Number one. And you have some really familiar names here. NVIDIA, Hi Mix, AMD. This is best of breed. Now these are all still great companies, but when we are momentum trading a stock, we want best of breed. That being said, there's nothing wrong with placing your investment dollars into a NVIDIA. I'm a huge fan. AMD, a huge fan. But for the purposes of a short-term swing trade, we're looking at AOSL. Again, number one in the industry group, earnings per share last quarter, 183%. The average of the last three quarters, 92%. The shares have an accumulation distribution rating of an A and you're seeing increasing fund ownership. Why does that matter? It matters because the shares are being held in more firmer hands. Now, take a look at this chart. I mean, it's a magnificent chart, but the problem is, is that is it so extended? We've come a long way. And as you can see here, the automated trend lines, I'll take them off, put them back on. We hit resistance on a monthly timeframe. Does that mean that there's no more fuel left in the tank? We don't know. There probably is. Remember, this is a sector, the EV chip sector that's expected to grow 50% in 2021. So what's the strategy here? It's very similar to our strategy with ACMR. Let's drill down to a weekly chart. On a weekly timeframe, this looks like it wants to go higher. The monthly timeframe, not so much because I'll show you, I'm going to overlay here on a weekly chart monthly resistance and there you have it in dashed line. So while sure, we can definitely go rallying higher this coming week. The problem is, does it hold or does it rally and then fade by the end of the day? So what's the best strategy here? It's certainly not from a risky war perspective. Best to go chasing right here right now. What I would do is this, take my crayon out, identify where there's been support before and set an alert. So our alert is set. Let's drill down to a daily chart. The daily chart, you can see we hit resistance both on a daily timeframe and on a monthly timeframe. Again, I'll take these off. Here's the value of the automated trend lines folks. It saves you so much time and there you have it. This is what keeps you out of trouble. So we have another alert that we could set here on a daily timeframe. So it's really best to wait for a retracement here and it's going to happen and then begin to nibble on your position. So AOSL, our favorite play in the EV space. Now the next sector, when I went into this analysis of the semiconductor shortage, the last thing I expected to identify was a computer company, personal computer company, as a really great opportunity to take advantage of the chip shortage because they have a couple of things going for them. One is the technicals, we'll get to them in a second, but two, there is a major change happening in the PC world given the fact that COVID has forced so many to work from home and PC shipments grew 10.7% in the fourth quarter of 2020 and that's a 4.8% increase on the year. This is a sector that has just seen year over year decline for a quite some time and on a regional view in the United States, the PC market had another strong quarter registering 20.6% growth year over year, despite economic and political disruptions. For the full year, the US PC market experienced its highest growth rate in 20 years and in Asia, the Asian Pacific market reached 25 million units and 8.3% year over year growth rate. So what's the play here? Well here are your top players, HP Hewlett-Packard, Dell, Lenovo, HP is not as much of a pure play on PCs, Lenovo is a Chinese stock, I tend to stay away from those, so our selection is Dell, let's talk about Dell. Now the Dell trade is not a momentum trade, this is more of a stock that has been in a trough for a long, long time. EPS changed last quarter up 16% very good. Now the last three quarters average EPS growth, negative 1%. So you're not seeing a real boost to the EPS of Dell on a quarterly sequential basis. So we're right at the beginning of the upswing and profitability at the company. If you take a look at this, a three year EPS growth rate is negative 6%. So this is a huge, huge change. This last quarter EPS growth rate of 16%. So it validates what the gardener's story told us that 2020 was the best year for PC sales in 20 years. So are we at the beginning of a major bull run here? I think it's possible. Sales margin return on equity, SMR rating in A, very strong. We have a accumulation distribution rating of a B, not the best, but you wouldn't expect it to be. It's in a very early stage of a recovery in their business. Let's do some technical analysis. Now Dell, along with most other stocks, bottomed out in March, consolidated, and then it hit a ceiling right here at around $71.15. We broke out in December, retested the breakout point it held this month, a continuation breakout. So this is an early stage breakout on a stock that hasn't done much in many, many years, weekly chart. Now in a weekly timeframe, we put in a new weekly high, but we didn't gain a lot of real estate. In fact, we spent a good portion of the week fighting to get back what real estate was taking the week prior. So net net, not a huge change on the week, upspot 0.6%. So the question becomes why? That's when we take out our algorithm. Click up a button. There you have it as suspected resistance. So what's the game plan here? Same as usual. We have a stock and an uptrend. We can create an alert if we pull back and retrace to the lower band of support. And there we have it, our alerts set. Now, what if we break out? We have to keep that in mind, right? Maybe this resistance is simply a temporary obstacle. So I want to know is when we close above weekly resistance, it doesn't matter where we trade intra period, what matters is where we close. So at the end of the week, we want to see that this breakout point has held. Now the strategy I like to employ is if we get a pullback to support, I scratch the edge. I buy a few shares that I add a bit more aggressively on a breakout retest and then a continuation breakout to new higher highs. Daily chart, the daily chart looks really, really good. You could argue that we broke out. It's not even necessarily an argument. So we may just break out higher here on Dell. But again, remember, use your automated trend lines off on. We have resistance above folks, and that's just on a daily timeframe. Let's overlay weekly resistance. So allow the shares to come to you or wait for closing breakout. Now the next sector that we're watching for opportunity is 5G. They're being adversely impacted by the shortage in communication chips. Now I have two trades that I like here, one of which this is very similar to Dell. I wouldn't expect to talk about this. One of which is going to be Ericsson and the other is going to be Qualcomm, both of which are listed by IDB as top trades in this sector. And here's the growth. Mobile PCs are also being equipped with 5G wireless modems. Again, back to the PC trade folks. Strategy analytics estimates that 9.9 million laptop computers worldwide will have 5G modems by 2025. That's not that many, but look at the growth rate. That's up from 700,000 in 2021. And here's where the rubber meets the road. We estimate 5G unit shipments of 338 million in 2020, up meaningfully from 16 million units in 2019, mostly driven by China. We model 525 million units in 2021 and 700 million units in 2022. This is a secular bull run. So let's now take a look at the fundamentals of both Qualcomm and then Ericsson. Now the reason why I chose Qualcomm over any other stock is because it had a rough earnings report recently in the shares of pullback they have not joined in on the recent rally. So given that is their opportunity because this is still a very strong company. It remains despite the earnings report in a confirmed uptrend. It has a score of 93 out of 99 in industry group rank relative strength versus the group B plus but that's because of the pullback recently, but still a respectable rating. Earnings per share changed last quarter. They got knocked down on this 119% but it was their forward-looking guidance that got them. Average quarterly growth rate over the past three quarters 71% earnings per share changed current quarter 53% sales changed last quarter 62% growth outstanding got an ASMR rating that sales margin return on equity. Look at the annual ROE 92.1% amazing and when you take a look at the institutional ownership it continues to increase and again that speaks to shares being held by firmer hands. Now this rating here is a D minus not good and that's reflective of the recent weakness in the shares. So when we look at the charts is there an opportunity now to go buying Qualcomm on this pullback? Let's take a look. Qualcomm monthly time frame we broke out here in November attempted multiple times to flash a continuation breakout. It wasn't sustained. We've pulled back retraced to this support level which is bullish. This support level which was resistance back here and back here is now acting as support. We do have a breakdown in RSI and volume is trending high on the month. We're midway through the month might this change? Maybe. Now putting up an automated trend line. Now these lines here were drawn by me. Let's use the automated trend lines and this is monthly automated trend line and you can see it's picking up critical support here on Qualcomm. Are we ready to buy? Maybe. Let's do a deeper dive weekly chart. Let's overlay monthly support and or resistance on a weekly time frame and there you have it in dashed line. So we're right at support. To me this is looking pretty bullish from a risk to reward perspective. I have a lot of upside potential yet I know exactly where I need to set my stop because we're right at support daily chart. Now the daily chart looks good. We recaptured a couple of support levels on Friday. The problem is we did see some topping action. I'd like to see this. I'd like to see Qualcomm close above 149 spot 32. And if we get that I'd be quite excited to buy the shares. Now I would also be okay with buying where we closed out on Friday. I would stay very small. I would test the market and buy once I break out above this resistance level here because that validates that my call to begin opening a position was accurate on that breakout. Now take note of the raindrop charts here. This is proprietary software to Trendspider. This is a mixture of volume weighted moving average and candlestick charting. And you had two sequential indecision bars and what they were telling you was that change in the direction was imminent. And sure enough on Friday we recaptured a support level. I think that we could move up higher here on Qualcomm. So Qualcomm looking really good. But be disciplined to understand it is lagging technically right now. And at the end of this video I'm going to be talking to you about market valuation. So you need to be very, very careful with any trades in any sector that you're putting on right here right now. More on that in a moment. We'll be using the Buffett indicator. Now Ericsson is another trade in the 5G space. Left 4 Dead a long time ago prior to the smartphone. It was a Pimp Mac Daddy. Smartphone hit the market. New generation of technology. Eric or Ericsson was left in the dust. But times they are changing. Ericsson now has an IBD composite rating of 92. Very strong. It's a top tier player. It's in a confirmed uptrend. It's number 11 out of 197 industry groups. It is not a momentum trade yet which is why we're not going for best of breed. But it's close enough. It's top tier. EPS changed last quarter 75%. Last three quarters EPS growth and a that means they didn't have any earnings. It's a wash. So we're in the early stages of an early earnings recovery. If of course we get another blowout quarter this coming quarter. SMR rating and a annual return on equity. That's what's driving this SMR rating 22.7%. Very very respectable. Now this may look bearish. It's not the fact that we don't have increasing fund ownership. If this stock begins to break out you will see funds begin to move in. So this could actually act as a tailwind for the share price as you begin to see institutions show some interest in the shares of Ericsson. Let's go to the chart. All right monthly chart of Ericsson in a nice uptrend here. We had a nice breakout of a long consolidation that breakout occurred in the month of June. Here's the lower band of rising support. Do we have resistance above? Let's use the algorithm. Click of a button. Yes we do. At current we are trading above this upper band of resistance. The question is do we hold it? I'm a little bit suspect on a monthly time frame anyway due to the fact that volume is rolling in considerably lower than last month's volume. I'd like to see that increase in the back half of the month weekly chart. Now on a weekly chart nice three-week continuation breakout rally. Let's throw up our trend lines. You can see that we broke out last week. The questions do we hold it this week? We may but let's not forget that we have monthly resistance above. So on the weekly chart let's overlay that monthly resistance. Click of a button. Boom. There it is and dashed line. So we close right at it. Can we buy these shares right here right now? No. Can we do it on a breakout? Sure. Assuming that we close out the week next week above it. So we're looking for a breakout or we're looking for a pullback to support. All right so I use the phrase nibble nibble to express that I want to be very very careful with position size and why. It's because we don't have that much space between this support level and this resistance level. Daily chart. The daily chart looks okay. We've broken out. We have our alerts set here. I think that we're satisfied with the current strategy for Ericsson. So again this is not a huge momentum stock yet but given the growth in the 5g space and Ericsson being a top tier player we could see considerably higher highs on the shares Ericsson through 2021. Now the next sector that I like in 2021 is semi-manufacturing. Now we have two trades here. One is a smaller cap but it's best of breed that is Amcor technology. The second is going to be everyone's darling Taiwan semiconductor. Let's begin with Amcor. This is really for those folks that are looking for alpha. Again top tier with a 99 composite rating by IBD. Relative strength in A minus. Very powerful. EPS changed last quarter 43 percent. EPS current quarter 62 percent. Three year EPS growth rate 27 percent and this is interesting. EPS estimate change for current year greater than the three year estimate. So now we're looking at a one year. Assuming this is going to be accurate. A one year EPS change that is going to outpace the three year growth rate that's very bullish. SMR rating in A annual ROE 16.7 percent. Anything in the teams is very respectable. Let's move on to the charts. We'll begin with a monthly chart and you can see that the month of February has just been simply a monster. We have broken out of a multi-month in fact multi-year consolidation. We need a pullback here. We're trading above on a monthly timeframe above the third standard deviation Bollinger Band. Here your automated trend lines are picking up prior resistance. They should now act to support. The question is do we have to wait for the shares to come all the way back down here to a 16 handle before we can get along? I don't think so. Let's go to a weekly chart. Now on a weekly chart we remain overbought right for a pullback. That doesn't mean we're not moving up higher this coming week but I want to identify where is my best risk reward entry point. It's certainly not here where we closed last Friday. So I'm going to use my automated trend line. Trendspot is telling me 1973 is the mark because it was resistance back here. Now it should act as support. If it doesn't well then we sit watch and wait for another support level and I want to get alerted if it holds and if it doesn't hold. Our alert is set. Now we forget it. Let the computer do the work for us. Great volume last week. Daily chart very extended on a daily timeframe as well. So I like this support level because what it will do it'll allow for a filling of the gap which opened up here on the 11th of February. No need to go chasing this. We have resistance above as well. Remember the automated trend lines. Take them off. Put them on. That's how you stay out of trouble. Identify resistance before you get involved with the trade. So I'm expecting a pullback here fairly soon on AMKR. Our alert is set. Now for a less speculative play on the global shortage in semis you can't go wrong with Taiwan Semiconductor. It has a composite rating by IBD of 97 EPS rating of 88. So it's got good earnings not spectacular earnings but I have to tell you these numbers for a company this size are simply outstanding. EPS changed last quarter 31 percent. EPS growth rate 14 percent. Annual ROE of 29 spot 7 percent. Let's take a look at how the chart is looking. Taiwan Semi monthly timeframe. Over the past year we've seen two major breakouts on Taiwan Semi. The first came here July of 2020 after a huge consolidation. You had a Bollinger Band squeeze. Beautiful. The second came in November on this breakout above an ascending wedge formation and ever since November has been off to the races. A beautiful chart. There's still room to run here on a monthly timeframe. Let's take a look at the weekly chart. Weekly chart we broke out last week. We did so on volume. RSI at current is 81 that's pretty high for a stock of this size. We were at RSI 90. So RSI is trending a little bit downward while the share price is picking up momentum. Let's go to a daily chart. I got to say while we close down on Friday this is still a pretty chart. I think we're consolidating here and we're getting ready for another continuation move up higher on Taiwan Semi. For an entry point let's go down to a four hour timeframe. I want to see how we close out today on Friday. Very good. We're holding support. I think we're breaking out on Taiwan Semi. That assumes that the market holds up folks and speaking of the market that takes us into a very good segue to talk about market valuation. I want to talk about this because I have been pretty bullish in this commentary. But I want to put into context where this market is on a historical basis so that you don't go into trading this coming Tuesday. We have a holiday in front of us. So trade reopens on Tuesday. Futures open up tonight, Sunday night. We want to appreciate where we're at in terms of valuation using the Buffett indicator. The Buffett indicator uses the ratio of total U.S. stock market valuation relative to GDP. And folks we are at highs that have never ever been seen. You may be saying, Bob what about the 2000 bubble that was here? We're way past that. We are trading beyond a two deviation range from where we would normally trade and we are approaching if not at we're certainly near a third deviation. This is unsustainable. So please be aware. I still stand by the commentary and the analysis that I've done that however is we want to keep in context the valuation of this market. Yes, there is a flood of liquidity approaching the market. Stocks can be propped up for months to come. But let's just keep in mind this is not going to end well. So in the meantime, semi stocks looking fantastic. We like Dell as a computer stock. EV AOSL is our symbol 5G, Qualcomm, Ericsson, manufacturing, Amcor and Taiwan Semiconductor. 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