Analysts, strategists, pundits and other talking heads proclaim that semiconductors and tech stocks are the future with guaranteed stock gains, rainbows and blue skies ahead. The SOX weekly and monthly charts, however, are not pretty and indicative of a sector that is topping out on a multi-month and multi-year basis.
Right now, the SOX is running higher wanting to tease the record high at 1625. The price poked through 1580, and 8's typically lead to 2's, as Keystone's 80/20 Rule says, so the 1620 prints. The red lines show negative divergence in play spanking price down from a couple of tops already. The current buoyancy in price is due to the analyst and business television hype telling folks to buy chips before its too late.
The stochastics are showing some strength over the last couple months but the neggie d from April to now is firm and remains in place. Price may tag that upper band at 1635 but that would likely be a great area to short from. The middle band, the 20 MA, at 1465, is in play. Before that, price would have to fail through the lower trend line of the rising wedge. The rising wedge is ominous since the price collapses from these patterns can be epic.
The ADX pink box shows the strong trend higher in the semi's in 2017 into early 2018. That strong trend petered out. Note how chips were soggy from February 2018 providing an early warning signal for the Fall 2018 trouble ahead. Stocks and semi's crash in Q4 2018. Chips recover but the ADX never developed into a strong trend higher in fact the ADX is weaker on each price high.
Watch for the negative Aroon cross which will tell you trouble is afloat. Keystone does not hold any positions in the chips right now long or short but would be looking for short possibilities. TXN may set up nicely as a short in a couple weeks say late September early October. Interestingly, the USD semiconductor ETF is showing the three price highs as level or weaker while the SOX chart above shows each price higher slightly higher. The smart money is looking for chip bag holders for the rest of the year. Are you one of them? 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.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.