Did This Beat-Up Industry Just Flash a Huge Buy Signal?

Like comeback stories?

Here’s one for you…

One market-leading sector after another was smashed to bits this summer as the correction wrought its havoc.

And these former champs were no exception – they’ve been picking up the pieces ever since. But now they’re ripping back to life. And it’s shaping up to be one sweet comeback trade that could help you snag you double-digit gains…

I’m talking about semiconductors. You might know these as the little chips that make your phone, computer and pretty much everything else electronic work.

Back in the summer, investors couldn’t sell these names fast enough. Semiconductors began badly lagging the broad market as soon as the second quarter kicked into gear. That was a bearish sign for stocks.  Why? You might recall I told you about how semiconductors are replacing copper as the world’s most important economic barometer.

Move over Dr. Copper—it’s semiconductors that are now driving the economy’s health, at least in part. My friend and technician Andrew Thrasher was the one who first proposed this relationship last year. And back in the summer, he talked about how semi’s recent stumble looked to be an intriguing warning sign…

It also didn’t help that Apple, Microsoft, and Yahoo! were all reeling from weak earnings reports at the time. The big tech trade looked dead in the water…

Well, don’t look now—but semiconductor stocks are quickly coming back to life:

Back From the Dead?

The Market Vectors Semiconductor ETF faked a strong breakout back in late May, only to get smacked back down to earth a few weeks later. In short order, these semiconductor stocks began to sink toward their October 2014 lows. It didn’t look promising…

However, since the August 24th swoon, semiconductors are up nearly 15%, compared to a 2.6% rise in the S&P 500. This group has already jumped above its August highs—and it looks like it could continue to pull the tech names out of their correction rut.

Just look at chip making giant Intel Corp. (NASDAQ:INTC). Intel kicked off tech’s earnings season earlier this week with a big beat, helping to get shares streaking higher after breaking out earlier this month.

INTC is quickly on the mend from its summer nosedive. [Ed. Note: Get my full analysis on INTC and access to my complete trading portfolio by clicking HERE.] Oh, and it doesn’t hurt that Intel’s newest offerings are hitting the market with positive reviews:

“The biggest news to come out of Intel last quarter was the release of Skylake chips, its new generation of chips with significantly better performance,” Business Insider reports. “Intel calls it the company’s ‘best processors ever,’ and is counting on it to be its next big sales driver.”

Semiconductors like Intel were some of the first stocks to reverse course and break down five months ago. Now, semiconductors look like they could be one of the groups that lead the market higher out of its correction.

Don’t get left behind…

Sincerely,

Greg Guenthner
for The Daily Reckoning

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