Wednesday, November 20, 2013
SOX Semiconductors Weekly and Daily Charts Overbot Rising Wedges Negative Divergence Upper Band Violation Price Extended
Semiconductors were the big story yesterday but no one noticed. The 2-day drop in the socks is from 510 to 498, -2.4%. Price fell under the red trend line on the daily chart but the blue lower trend line for the channel provides support, along with the 50-day MA at 498. The weekly and daily charts show universal negative divergence across all indicators for both time frames, a very negative set-up and one you typically do not want to fade. The ADX on the daily shows that a strong up trend was trying to form in late September but the ADX has stumbled lower ever since showing that there is no strong uptrend for semi's in place despite the lofty prices.
The weekly chart shows stochastics in overbot territory, a red rising wedge and negative divergence. The RSI is starting to place a lower low which is negative for the weekly time frame. Price violates the upper standard deviation band over the last few weeks and needs to visit the middle band, the 20-week MA at 487.32 and rising, at a minimum, and the lower band at 457.46, and rising, is also in play. The pink dots show the price extension above the moving averages requiring a mean reversion like the prior tops. The charts create potential for short semi trades such as the long, although thinly-traded SSG inverse ETF, or shorting SMH, or many other options and short hedging and trading strategies.
The thick maroon line is 497.09 identified by Keystone's algorithm, Keybot the Quant. This is a bull-bear line in the sand where bad things happen to equities if SOX 497.09 fails. This number will fluctuate slightly today but the 497.09 is a good level to monitor. So the semi's are a big tell today for the broad market. Market bulls win and equities will likely remain buoyant if the SOX remains above 479.09 but bears will rule moving forward if SOX fails 497.09. Projection is lower prices moving forward for semiconductors. Since there is a chip in nearly every product manufactured nowadays, semi weakness moving forward indicates a sick global economy ahead. 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.
Note Added 8:01 PM: SOX fails at 497.12 at 2:36 PM today ushering in broad market selling.