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Merrill passed the chips, now Lehman passes the dip

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Last week, Merrill Lynch "passed the chips" when it upgraded several chip stocks in the group saying the worst was behind. This morning, semiconductors stocks are set to dip as Lehman Brothers told clients overnight that Intel (NASDAQ:INTC) is planning to drop a "price bomb" on August 26th in an effort to take back market share from rival Advanced Micro Devices (NYSE:AMD). Dan Niles at Lehman Brothers said the leading chipmaker (Intel) is planning to cut prices by 50 percent on high-end PIVs. He expects the price for the high-end PIV 1.8 GHz to drop to $260 from $562, and that the low end processors will be cut as well.

On Friday, shares of Intel (INTC) closed just under its 200-day MA at $31.68 and this morning is trading at $30.31. Shares of Advanced Micro Devices (AMD) finished Friday's session at $19.25. Look for both to be under further selling pressure at the open.

Stock futures red

Stock futures are in the red this morning with S&P futures trading down 5 points, NASDAQ futures are lower by 24 points and Dow futures are off 29 points. Fair value for the S&P 500 today is $3.85. HL Camp & Company has their computers set for program buying at $5.21 and set for program selling at $2.19.

Today's play of the day

Today's call play of the day on OptionInvestor.com in Broadcom (NASDAQ:BRCM) is going to have some trouble at the open with the pre-market weakness we're having in technology. Tread lightly here and traders may want to wait a while on this one. When stock futures are trading lower, it's a good be the MARKET action often overrides an individual stock's technicals. Should Broadcom (BRCM) lose its recently found momentum, the stock could easily pull into the $40 level.

Jeff Bailey
Senior Market Technician

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