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The stocks that could soar if the market keeps rising

Some market watchers expect semiconductor stocks to continue their rise, but others are urging advise investors to wait for a dip.

They went up more than 4 percent for the second-straight week — the first time they had done so in more than two years.

Semiconductors are considered cyclical stocks, meaning they rise as the market rallies and drop as it dips, due to their use in so many electronic devices. Yet beyond the general updraft in stocks, there may be another reason why they've been rising recently.

Some say that under a Donald Trump administration, loosening of regulation may lead to revved-up merger and acquisition activity.

"The industry is looking for further consolidation, and the current structure of regulation didn't allow all that consolidation to occur this year," Nicholas Colas, chief market strategist at Convergex, said Friday on CNBC's "Trading Nation."

Consolidation in the semiconductor space has surged over the last 10 years, according to a report earlier this year by consulting firm McKinsey. The total number of deals completed in 2015 reached 23, for a total value of $4.3 billion; that compares to the 11 in 2005, for a total deal value of $300 million.

The S&P Semiconductors Select Industry is up 25 percent year to date. One of the biggest semiconductors, California-based Nvidia, has surged 183 percent this year alone. And Qualcomm is up 35 percent year to date.

Yet Colas said he wouldn't "chase them here."

"The hope is that the next administration is going to allow some consolidation to occur, and hence this group works. But we think it's probably overbought right here; we'd wait for a pullback before getting in," he said.

"I think you buy any pullback," David Seaburg, head of sales trading at Cowen Group, said Friday on CNBC's "Trading Nation."

Consolidation will continue, according to Seaburg, which will boost semi stocks. He said he would prefer to buy the chipmakers over "any other group within technology" at this point, and recommends buying an ETF in the space for general exposure.

Such ETFs might include the iShares PHLX Semiconductor ETF (SOXX) or the VanEck Vectors Semiconductor ETF (SMH).


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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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