Wednesday, June 19, 2013

SOX Semiconductors Weekly and Daily Charts Sideways Symmetrical Triangle Bull Flag Rising Wedges Overbot Negative Divergence

The semiconductors receive a strong goose over the last four days. Chips go into almost every product these days. The bounce is surprising, however, considering that the manufacturing data remains challenged for many months. The daily chart shows the negative divergence spank down as June started and then SOX bounced off the 460 level. There is near-term momo so that may help continue some upside higher highs but the charts point to weakness ahead for semi's as the days and weeks move along.

The weekly chart exhibits a couple of textbook chart patterns. The green sideways symmetical triangle resolves to the upside as 2013 began. The vertical side is from 100 to 120 handles, so this targets the 490-510 level (using the 390 break out level). The blue two-leg bull flag is also in play with the first leg about 70 to 90 handles. The flag consolidation behavior occurs from February-April when price decides to begin the second leg up from 410-420, thus, the target for the bull flag pattern is 480-510. Keystone's 80/20 rule says 8's typically leads to 2's, so 480 would hint that 520 is on the table. The close exactly at 480 is cheesy so today will show if a further high in the 480's occurs, or not. All these techniques point to the current 480-520-ish area as a topping area.

The weekly chart has overbot stochatics, near overbot RSI and negative divergence across all indicators. The SMH chart is a similar proxy for SOX. Projection is for price to peak and roll over to the downside as the days and weeks play out. Keystone opened a long position in SSG which is short semi's (positive divergence developing over coming days) but many other plays are possible including shorting SMH. This four-day upside pop may create some additional buoyancy so there is likely patience required on this top call. Likewise, if Chairman Bernanke shows up with a money bazooka today, that will send all equities higher for a couple days. MU earnings today will affect semi's. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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