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That makes sense!

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Every so often I hear something on CNBC that makes sense. I can't remember the fellow's name, but a fund manager on CNBC was fielding calls from investors and one investor asked what he thought of Analog Devices (NYSE:ADI). The fund manager didn't like the stock and rated it a "sell" or at least a "don't buy it." Most fund managers are "fundamental" and leave most of the technical analysis to their traders and market technicians.

Well, in our 01:00 update we reviewed what took place in shares of Qualcomm (NASDAQ:QCOM) where that stock gave a triple-bottom sell signal and had a bearish vertical count of $37 associated with its chart. The fund manager mentioned something about Analog Devices (NYSE:ADI) somewhat reliant on the telecom sector for demand for its products and he felt the telecom sector would lag any type of economic recovery and would therefore avoid ADI.

We decided to "test" that fund manager's thoughts and see what the market was perhaps saying about ADI. Is there anything similar in its supply/demand chart like that found in QCOM's?

Analog Devices Chart - $1 chart

Perhaps the fund manager on CNBC is getting some agreement from the market if he believes that ADI will lag due to a lagging telecom sector even if the economy is to recover. We do see some similarities currently taking place in the ADI point and figure chart that were present in the Qulacomm (QCOM) chart back in January. According to Dorsey/Wright & Associates, the bullish percent for the Semiconductor sector is "bear confirmed" at 35.33%. We're getting closer to an "oversold" level so traders may want to start with a 1/2 position, just in case we were to see ADI rally to $41-$42, at that time, a trader may then round out to full position, with a stop above $45.

Jeff Bailey
Senior Market Technician
Option Investor

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