Xilinx sharesOver the past year, the majority of semiconductor stocks have been moving mostly sideways. The VanEck Vectors Semiconductor ETF (NYSE MKT: SMH) has been trading between $45 and $56 since last August. It recently hit the high end of the range and has since lost ground for four straight weeks.

But one semiconductor company that seems to be trading on its own merits within the sector is Xilinx (NASDAQ: XLNX).

Xilinx specializes in integrated circuits and programmable devices. This specialization might be what is allowing it to separate itself from the rest of the sector.

Looking at the daily chart, we see that Xilinx shares just hit the bottom rail of a trend channel that has dictated trading for almost two years now. I didn’t draw the upper rail on the daily chart, but you will see it when we move to the weekly chart.

Xilinx shares daily chart

We see that the daily stochastic readings have been hovering down around the 25 level for most of May and just recently made a bullish crossover and spiked a little.

On the weekly chart, we see the trend channel that I referenced before and how this is the fifth time the stock has hit the lower rail of the channel. Each of the four previous times the stock hit the lower rail it was a good buying signal.

Xilinx shares weekly chart

The weekly stochastic readings are near oversold territory and appear as though they will make a bullish crossover this week or next. Previous crossovers have also been good buying signals, and many of them have come as the stock hit the lower rail of the channel.

In addition to the technical picture, I like the fact that the sentiment toward Xilinx is rather skeptical at this time. The short interest ratio is moderate, at 3.45, but the analyst ratings show very little optimism. There are 22 analysts following the stock. Only seven rating the stock as a “buy,” while 14 rate it as a “hold” and one rates it as a “sell.”

The fundamentals of Xilinx are also interesting, as the company has better operating margins and gross margins than the industry as a whole, yet the stock’s price-earnings ratio is lower than the industry average.

While the weekly chart is the main thing that drew my attention to Xilinx shares, the fundamentals and the sentiment also weighed into my opinion toward the stock. I think the recent dip down to the lower rail of the channel is presenting a buying opportunity that could be used on an intermediate-term basis for a move up to the $51-$52 range – or it could be a long-term buy that you ride for a few years.

As long as the sentiment is skeptical, the fundamentals are good and the channel continues to guide the stock higher, why not hang on to it?

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Published by Wyatt Investment Research at