Wednesday, December 4, 2013

SOX Semiconductors Weekly Chart Overbot Rising Wedge Negative Divergence Price Extended

The semi's have been posting strong drops, then equally strong bounces, each week, over the last month, bulls and bears exchanging blows. The bulls receive the benefit of the doubt with price floating higher but now forming a textbook rising wedge. The current candlestick for this week is a doji indicating a trend change on tap. The red lines show universal negative divergence across all indicators. RSI is not overbot but it did tag the overbot level a few months ago and overall, on a long-term basis, RSI stays within the +70 and -30 range avoiding the overbot and oversold territories. Price is extended well above the moving averages (pink dots) requiring a mean reversion (lower prices).

The collapse from rising wedges can be quite dramatic. Semi's can be shorted here forward. SSG, a double X inverse ETF, is a Keystone fave for shorting semi's but it is thinly-traded. The volume will likely pick up moving forward. SMH can be shorted (chart is the same as above) as well as individual chip plays. A chip is in almost every product manufactured these days so once the semi's fail, that will weaken the broad indexes. 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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