Munster sees some improvement in the chip sector (SMH) in the first part of the year, but he said the question remains whether it can be sustained.

It continued when we had continued rallies in the Semiconductor HOLDRs (SMH) for no apparent reason.

And stay away from semiconductor stocks [SMH] all together. - Pete Najarian

Najarian pointed out some unusual options action in the Semiconductors ETF(SMH) today. He explained that traders bought 45,000 January 25 calls on the SMH. He thinks the action is bullish for Intel(INTC), Texas Instruments(TXN) and Applied Materials(AMAT).

3 Stocks I Saw on TV:
Dan Fitzpatrick examines three stocks viewed on 'Mad Money' and 'Fast Money.' Today's stocks include Smith International, Merk and Semiconductor HLDR.
Click here to watch the video.

BUY

Second strongest index among momentum indicators

Semi Conductors, oversold

Same pattern as IWM and QQQQ above, 7 successful trades out of 11 occurrences since SMH started trading in 2000 for an average return of +1.19% per trade. The last trade triggered on the first day of 2006 and was successful: +2.65% gain.

Although the system is intended for QQQQ, it works ok for SMH (the semiconductor ETF) as well. 37 out of 43 successul occurrences for an average return of 0.31% per trade.

Although technology may flourish (assuming no significant slowdown or recession in the U.S. and abroad, the semiconductor industry has essentially become a commodity business whose margins and profit are unlikely to show significant growth or promise (with the exception of some specialty product companies)

From Barron's 5-21-07

"Every now and then, Alan tallies insider buys and sells, either for the market as a whole or for a specific sector. In his most recent issue, he turns the spotlight on semiconductors, where he finds the sentiment of the folks supposedly in the know startlingly bearish...The chip stocks fetch something north of 22 times earnings and five times sales. Why a cyclical industry bereft of significant growth is endowed with such rich multiples is a puzzle to Alan, more symptomatic of speculative ebullience than value. And he rates the Semiconductors HOLDRs Trust (ticker: SMH) as an inviting short."