Don't even try picking a bottom in these stocks: Trader

As chipmaker stocks sold off severely on Friday, one trader had some advice for those who may be looking for a bottom: Don't be a hero.

The S&P 500 semiconductor industry group has fallen almost 13 percent year to date. And according to Eddy Elfenbein of the Crossing Wall Street blog, investors shouldn't expect a turnaround anytime soon.

"It just doesn't look good for the semis right now. They're being squeezed on all sides," he said Friday on CNBC's "Power Lunch."

Elfenbein said chip stocks are facing pressure from faltering PC sales, a strong U.S. dollar and weak economies in Asia. Despite better-than-expected earnings reports from chipmakers such as NXP and Qorvo, Elfenbein said the outlook remains grim until those central conditions improve.

"Until that gets better, I think people ought to steer clear of the semiconductors," he said. "Don't be a hero, don't try to pick a bottom."

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Looking to the options market, Stacey Gilbert of Susquehanna said traders are continuing to bet on more pain for semiconductor companies.

"The sentiment continues to be pretty bearish here," Gilbert said Friday.

Specifically, Gilbert said she's seen at-the-money put buyers on shares of Texas Instruments and NVIDIA, which is more likely to indicate big traders placing outright bearish bets rather than merely hedging existing long positions.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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