Sunday, February 14, 2016

SOX Semiconductors Weekly Chart H&S (Head and Shoulders) Patterns

Chips are selling off over the last few months from 750 to 570 a -24% drop into a bear market. A lot of semiconductor business was in the area of wearables but the public remains uninterested. Ditto Apple Watches. Ditto PC's (personal computers) as young people use their smartphones for their internet needs nowadays. Chip demand continues to falter and the semi stocks are punched in the face. SOX, SMH and XSD are three indexes affected.

The chart above highlights the H&S patterns in play for the SOX. There are three potential H&S patterns, the teal neck line at 582-ish targets 414 (750-168) and the neckline ruptured last week. The red neck line at 570-ish targets 390 (750-570) if the 570 level gives way. Price stabbed down through but did not close below. The blue neckline at 545-ish targets 340 (750-205) if the 570 level gives way. If SOX loses the 545-570 level, only a few dollars lower, the door is wide open to the 340-414 target zone.

Price has violated the lower standard deviation line so the middle band at 639 is in play. The lower neck line and 200-week MA support form a confluence at 545 so this may act as a magnet to pull price down for a support test.

The green lines for the indicators are all positively-sloped but are not in positive divergence. Of course price has to print a lower low (than August at 540-545-ish) for a divergence to occur against the indicators and create possie d. Nonetheless, all five indicator lines are sloping higher, with price in the vicinity of the August lows, which is encouraging for semiconductor bulls. Price may stagger sideways through 545-582 until it gets its bearings. Above 582 will likely confirm that the stock market recovery rally is real and gathering juice higher. Below 545 and chips will collapse and the stock market will take a strong and drastic leg lower. 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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