Make It Stop! Oh The Humanity!
A little follow up on last
week’s discussion regarding Semiconductors. At the time, Semi’s were very oversold
and hitting key daily support zones. Our commentary pointed to the real likelihood
of at least a tradable bounce. Since then, the SOX.X have rallied over 28% and
today backed off hard on last night’s earnings announcement from Intel. Wait
a minute, was Intel really the culprit here? I don’t think it was. You know
what? I don’t even care! Here is what we saw from a Fibonacci perspective.
Below is a daily chart of
SOX.X. The run from
200 to 260 was quick and tradable. But warnings signs were definitely going
off for Fib Freaks after yesterday’s rally into this gigantic Fibonacci price
resistance zone. Not only was there a monster brick wall above, but we were
hitting the 50 day simple moving average. Take a look at how this very steep
trend down has followed the 50 day sma.
Anyway, so what’s the game
plan? I see that semiconductors have rallied almost 30% in 4 trading days. A
pullback would be in order, and what better place to get that pullback than
against our Fibonacci resistance zone. Now, I’ll look at 60 minute charts to
see where support should exist. Below, I’ve included a 60 minute chart of SMH.
The island reversal is not a good sign for bull hopefuls, but the focus support
zone on SMH is from 18.17-19.24. If this zone is violated to the downside, my
vote is for new lows. If SMH can hold this support zone then this index will
work hard to go fill the gap down we just made today. Let’s just play “what-if”
right now. Let’s say on the daily chart of SOX.X above that we can clear that
big resistance zone and the 50 day sma. If that happens I will be committing
investment dollars to the long side in Semis. Until that happens I can’t commit
money to the long side.
Good night!