Breakout Watch: 5G, IoT Trends Drive This Chip Stock Into Buy Zone

Already one of the best IoT and 5G stocks to watch, semiconductor maker STMicroelectronics (STM) is testing a new buy zone. STM stock continues to trade near the 41.52 entry it initially cleared on Feb. 1.


With a 93 Composite Rating, STM stock joins Macom Tech Solutions (MTSI) and Taiwan Semiconductor (TSM) in the semiconductor manufacturing industry group. The chipmaker industry ranks No. 39 among the 197 groups IBD tracks.

STM stock joins TSM stock and power generation company Generac (GNRC) on the IBD Breakout Stocks Index.

After several quarters of declining or erratic earnings growth, STMicroelectronics posted a 47% EPS increase in Q4. Revenue growth accelerated for a second straight quarter, coming in at 17%.

At its Q4 and full-year 2020 report on Jan. 28, the company said that smart mobility, IoT (Internet of Things), 5G and power and energy management are driving demand for semiconductors across the entire industry.

STMicroelectronics said car production volumes, replenishment of inventories and stay-at-home trends are driving the need for semiconductors. To meet demand and advance its strategic initiatives, STMicroelectronics plans to invest $1.8 billion to $2 billion in 2021.

Who Joins STM Stock On The IBD Breakout Stocks Index?

STM Stock Fabricates New Buy Point On Demand For 5G Stocks

On Feb. 2, STM stock edged past a 41.52 buy point in a cup with handle. Since then, the 5G stock has floated in and out of buy range, finding support at its 21-day moving average. STMicroelectronics has remained well above its longer-term 10-week line since retaking it in April.

The relative strength line has come off the highs it hit in December. See if the RS line picks up to show rising stock market leadership as STM stock nears the buy point and a new all-time high.

As the stock market, particularly the Nasdaq, reaches new heights and leading stocks to watch like Digital Turbine (APPS) and EXP World (EXPI) show frothy action, continue to follow sound sell rules.

While stimulus spending and other factors may continue to lift stocks, be prepared to take defensive action if the uptrend reverses.

In the meantime, see if STM stock can move decisively past resistance and back into buy zone.

IBD Breakout Opportunities ETF

The IBD Breakout Opportunities ETF from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this allows you to essentially invest in the entire index in addition to or rather than buying individual stocks. Learn more about the ETF and Innovator funds.

Follow Matthew Galgani on Twitter at @IBD_MGalgani


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