In the third quarter Texas Instruments cited weak demand for chips used to make high end cell phones. Recently they announced they will be upping the production of chips for low end mobile devices because that is where the demand is. Shouldn't this be good news? The stock has tumbled from almost 34 down to now 28.66 in a month. Overall the chip sector has been weak but does anyone think this can fall much further? Maybe the company will step in with some share repurchasing(they announced another few billion dollars to be used for share repurchases in the last few weeks).
Google.com shows Texas Instruments symbol TXN income rising, equity about unchanged. Market capitalization is big, about US $ 43 billion. It is hard for something big to double in size. Yahoo.com shows no insider buying in the open market. If the people that know most about the business do not want the stock then why do I want it?
The stock has strong support in the 27.00 area. If we are not at a buying point we certainly are close. I don't like buying stocks that are getting pounded like this, BUT when you get close to a strong support area you have a VERY low RISK, HIGH REWARD situation.
First off, lets look at the chart. http://stockcharts.com/h-sc/ui?s=TXN&p=W&b=1&g=0&id=p23165918496 Judging from the chart, it will most likely go lower to brush against the 200 week moving average right around 26. If it does then it will make a double bottom. What is the chance that it will go through the red line? I dont believe there is much of a chance. Its a well established company trading at a very favorable P/E with strong financials and they did announce a stock buyback program along with an increase in the dividend. So you have two dollars down chance and ten dollars up chance. I would buy it once it pulls back to under 28 dollars. The down trend will continue for just a little bit longer and then it will arc back up.
They also have some exposure to big screen tv market like GLW. Also MOT has been very weak. You need to see a change in the sector before going long, imo.
This is a really good example of how averaging down can work for a swing or position trader. We are close to VERY strong support at 27. The stock may or may not get below 28.00. If you wanted to be sure to catch the upside you could buy a portion of what you were going to buy here and add to it all the way to 27.