Today’s Big Stock: KLA-Tencor Corporation (NASDAQ: KLAC)

Most of the price levels highlighted in Today’s Big Stock are of the horizontal variety. They’re easy to identify and easy to trade off of. However, from time to time I also like to discuss important levels that are somewhat of a “moving target” in the form of up or down trendlines. One such stock forming an up trendline is that of KLA-Tencor Corporation.

KLA-Tencor Corporation is engaged in the design, manufacturing and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. KLA-Tencor’s offerings include the Chip Manufacturing, Wafer Manufacturing, Reticle Manufacturing, Complementary Metal-Oxide-Semiconductor Image Sensors Manufacturing, Solar Manufacturing, light emitting diode Manufacturing, Data Storage Media/Head Manufacturing, Microelectromechanical Systems Manufacturing, and General Purpose/Lab Applications. It also provides refurbished KLA-Tencor tools as part of its K-T Certified program for customers manufacturing larger design-rule devices. Its products are used in a number of other industries, including the LED, data storage and photovoltaic industries, as well as general materials research. KLA-Tencor’s products and services are used by the wafer, integrated circuit (IC or chip), reticle and disk manufacturers in the world.

To review KLA-Tencor’s stock, please take a look at the 1-year chart of KLAC (KLA-Tencor Corporation) below with my added notations:

KLAC has been in a steady up trend since September and actually came close to breaking out to a new 52-week high earlier this week. Along the way, KLAC has formed a nice trend line of support (blue). Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. As you can see, KLAC’s trend line is VERY important to the stock since it has been tested on (7) different occasions.

The Tale of the Tape: KLAC has created a nice trend line of support over the last (5) months. A long position could be entered on a pullback to the trend line support with a stop placed under the entry. A short position could also be entered if KLAC were to break the trend line of support.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT