Top 3 S&P 500 Equities Are All Chip Stocks

The top three performing stocks out of the entire S&P 500 index are chipmakers, CNBC's Seema Mody said on Thursday's "Trading Nation."

The three stocks are Advanced Micro Devices, Inc. AMD which is up 146%, followed by Lam Research Corporation LRCX, higher by 118% and KLA Corp KLAC, which is up 100%.

Semiconductor Group 'Way Ahead Of Itself,' Newton Says

Newton Advisors founder Mark Newton said on "Trading Nation" the group of stocks has "gotten way ahead of itself," and investors should expect to see a mean reversion next year.

Evidence for this theory can be found in the charts, he said — especially with AMD's stock, where common indicators are flashing concerning signs.

For example, AMD's relative strength index is north of 70 on a monthly basis, and this is "very much a concern," Newton said.

The last time this occurred was in 2014 and in early 2018, and both times resulted in a period of underperformance.

"My thinking is it's right to really take the foot off the accelerator and think that this group starts to stall as we enter the month of January."

Other Chip Stock Opportunities

Nancy Tengler, chief investment officer at Laffer Tengler Investments, was also a guest on "Trading Nation."

Other names in the chip sector look attractive, especially those that are diversified and offer dividend growth, she said.

Some of the examples include Texas Instruments Incorporated TXN, Broadcom Inc AVGO and Intel Corporation INTC, Tengler said. 

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