×

Chart analyst: Buy the chip stock breakout

A trader works on the floor of the New York Stock Exchange.
Adam Jeffery | CNBC
A trader works on the floor of the New York Stock Exchange.

This week's breakout in chip stocks should lead this group higher in the months ahead with upside targets for the Philadelphia Semiconductor index (SOX) at 720 and intermediate-term upside resistance found near June highs of 751.

While technology tends to underperform in December, we are seeing the opposite thus far with tech showing better performance than any other major sector for the one-month, three-month, and six-month periods.

The SOX in particular is showing evidence of outperforming other parts of technology in the last couple months. I expect dips to be bought in the weeks ahead.

Looking at daily charts, we see the SOX at its highest levels since July. Even with an underperforming Nasdaq, the SOX held steady near former highs from late October.

Here's how to trade the SOX going forward...