National Semiconductor loses money in Q4, but what are the positives?

Net loss. Lower cash flow. Pressure on the top line. It doesn't add up to a bullish scenario. That hasn't stopped the stock from trending higher since the beginning of the year, however.

But is the buying about to stop? Shares of National Semiconductor were down 1.6% going into the earnings report. They were down another 1.4% in the after-hours trading session at one point while I was simultaneously writing this and checking out the price action (another check showed the stock down by only 1%).

I'm not so sure that the uptrend will necessarily be broken. Management said that bookings increased by 30% on a sequential basis in the fourth quarter, and they mentioned that smart phone manufacturers were helping to promote an improved environment by ramping up production. Plus, I'm sure shareholders noticed that the annual profit of 31 cents per share in fiscal 2009 also beat earnings expectations.

The market might be taking profits now that the results are out. As far as I'm concerned, even though it feels as if any weakness after the report may represent an opportunity to buy, I think you have to come at this situation very carefully. Like I said before in a recent discussion about Texas Instruments and its optimistic guidance, you don't necessarily want to argue with the tape, but you do want to protect yourself with a stop.

The sequential growth in gross margin and bookings might be foretelling better times ahead for the chip maker. Even so, don't jump into the stock without some heavy due diligence, with a focus on where general sentiment may be heading after the recent rally in the equities market eventually runs its course. Put another way: I don't think the bears will be in hibernation forever.

Disclosure: I don't own any company mentioned; positions can change without notice.