ON Semiconductor Corp: If ON Stock Does This, it Will Explode

ON Semiconductor CorpON Stock: Locked and Loaded

The semiconductor sector is the best-performing technology sector for 2016. This segment for the market has caught a bullish fever. The notion that a rising tide floats all boats is especially true when it comes to investing. Much of the performance of a stock has to do with the sector that the company trades within.
It is not a coincidence that I am focusing my attention on this sector. I have come across ON Semiconductor Corp (NASDAQ:ON) stock, and it is not an exception to the rule. After a slow start to 2016, ON stock is powering ahead.
All of my analysis begins with the stock chart, and my analysis of ON Semiconductor stock is no exception. I use charts because they are easy to use and the information is always current. They allow me to construct a systematic trading strategy that keeps me disciplined and objective. I am bullish on ON stock, and the following chart below supports my bias.

Chart courtesy of StockCharts.com

The chart above illustrates a constructive chart pattern. The two trend lines represent support and resistance. The support line has served as an incredible opportunity to acquire shares, and these instances have been few and far between. These opportunities have come on the heels of panic selling in equities as a whole. This trend line defines the bull market in ON stock, and my bias will remain bullish for as long as ON stock trades above it.

The resistance line on the chart above has done a great job at containing prices for almost 10 years. The price of $13.50 marks a major level of resistance for ON Semiconductor stock. If and when the bulls finally muster enough strength to break through this level of resistance, a violent reaction is expected. The longer a resistance level remains intact, the more violent the reaction will be when this level is finally broken.

The only level of resistance after $13.50 is the all-time high that marked the peak in the dotcom bubble. This level sits at $27.75 and would be the logical price objective for ON Semiconductor stock.

In the chart above, the lower panel labeled “Bullish MACD Cross” supports a possible test of this major level of resistance. Moving average convergence divergence (MACD) is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals. This bullish MACD cross signals that the bulls are now in control of ON stock, and that the level of resistance at $13.75 will be tested and possibly broken if the outperformance in the sector is set to continue.

The following ON Semiconductor stock chart adds further fuel to the bullish fire.


Chart courtesy of StockCharts.com

In August 2016, ON stock generated a golden cross. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is on the horizon. It is wise to trade in the direction of this signal. My position should either be long or neutral in the face of this signal.

The horizontal blue line served as resistance from much of 2016, and has now become support after it was broken to the upside. A break below this level would partially negate the bullish bias, as a test of the longer-term trend line would be the next logical level of support for ON Semiconductor stock.

Bottom Line for ON Semiconductor Stock

I am currently bullish on ON Semiconductor stock, and I will remain so as long as the long-term trend line remains intact. There is a long-term level of resistance for which I am eagerly awaiting a test and possibly a break. If ON stock breaks this level to the upside, my bias will become overly and exuberantly bullish.