Is This Red-Hot Sector About to Cool Off?

The tech-rich Nasdaq Composite (COMP) just notched its seventh straight weekly win on Friday, as did the Market Vectors Semiconductor ETF (NYSEARCA:SMH). In fact, the semiconductor exchange-traded fund (ETF) just hit a record high of $65.60 yesterday, echoing the broad-market indexes. However, if history is any indicator, some semiconductor stocks could be ripe for a short-term pullback. Specifically, we'll take a look at how Microchip Technology Inc. (NASDAQ:MCHP), Linear Technology Corporation (NASDAQ:LLTC), and Texas Instruments Incorporated (NASDAQ:TXN) are faring on and off the charts.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, those three semiconductor stocks have been hit particularly hard after COMP winning streaks of at least seven weeks -- a feat accomplished just 12 other times. (This retailer, meanwhile, is among one of the biggest benefactors of such winning streaks, historically.) Can they defy history this time?

Going four weeks out, MCHP has averaged a loss of 1.5% after the last 10 COMP streaks, and has been higher just 20% of the time. The stock just last week hit a record high of $61.97, as shareholders and analysts applauded a blowout earnings report. However, the equity's 14-day Relative Strength Index (RSI) now sits at 76 -- well into overbought territory, suggesting a pullback may, in fact, be due. That would be quite a relief for Microchip Technology Inc short sellers, as more than 10% of the stock's float is sold short, representing nearly nine sessions' worth of pent-up buying demand, at MCHP's average pace of trading.

LLTC has been around for each of the Nasdaq's lengthy winning streaks, but averaged a four-week loss of 2.2% after a "signal." Further, LLTC was higher four weeks out just a quarter of the time. As with SMH and MCHP, it's been a stellar three months for Linear Technology Corporation, with the stock up roughly 33%, and just off a 15-plus-year high of $64.42, tagged in late July. However, unless something goes wrong on the M&A front, it's unlikely LLTC -- being bought by Analog Devices, Inc. (NASDAQ:ADI) -- will stray too far from its current perch in the $60 neighborhood.

TXN has also been around for all of the COMP's seven-week rallies, but averaged a four-week loss of nearly 2% afterwards, and was positive just 25% of the time. Not to be outdone, Texas Instruments Incorporated shares rallied as high as $72.58 in late July -- territory not charted since the turn of the millennium -- after yet another rock-star earnings showing. The stock is now taking a breather atop the round-number $70 region, and another flood of upbeat analyst attention could add fuel to the equity's fire. Despite TXN's year-to-date rally of more than 27%, only eight of 24 analysts offer up "buy" or better endorsements -- leaving the door wide open for upgrades to lure even more buyers to TXN's bandwagon, and help the stock defy history.

Finally, the SMH has rallied more than 35% over the past six months, and was last seen lingering in the $65 area. The ETF's 14-day RSI of 73 is in overbought territory, once again suggesting a breather may be on the short-term horizon. Meanwhile, option buyers are either betting on a pullback or purchasing hedges via SMH puts; on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the ETF's 10-day put/call volume ratio sits at a lofty 10.10. Meanwhile, put open interest has been higher just 4% of the time during the past year, with more than 252,000 contracts in residence, compared to fewer than 28,000 SMH calls.

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