The technology sector showed extreme weakness in midday trading Wednesday, as the Philadelphia Semiconductor Index dropped dangerously close to a 52-week low. But don't look for opportunities in the semis just yet, says one Fast Money Trader.
Shares of two semiconductors, Applied Materials and NVIDIA , hit a 52-week low Wednesday. Some brokerage firms have become bearish on Intel , citing inventory build at several chip makers, which is bad for gross margins.
Rotate out of the semis and into software names, says Joe Terranova of Vitrus Investment Partners.
But if the semis, which provide chips to operating systems aren't selling because computers aren't being sold, wouldn't that hurt software names too, asked host Melissa Lee. Terranova says that could be the case, but from a technical standpoint, he likes this mean reversion trade. He adds that the software names have "significantly" underperformed relative to the semiconductors throughout the earlier part of the year.
Elsewhere in the tech space, Cisco Systems is scheduled to report earnings after the closing bell Wednesday.
Jon Najarian, co-founder of optionMONSTER.com, likes the stock at $23 a share because it's one of the big moving averages. Najarian says he's seeing a lot of calls being bought. He recommends buying shares of CSCO on this dip.
Lee asked Patty Edwards of Storehouse Partners if she would consider buying Cisco, granted the company is expected to start paying a dividend in the near future. Edwards says she isn't interested in a company's dividend, so much as what it's doing. She prefers IBM right now.
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