SOX Socked…But Will It Bungee?
The big negative for the semiconductor index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) Wednesday was
that a long-term line of major support was breached as the SOX fell 5.5%. What will
make any recovery tough for the chip sector is the fact that the long-term support will
likely turn into a level of resistance should the semis decide to battle back.
The breakdown in the SOX is a psychological blow to the
broader Nasdaq since so many traders were looking for new leadership.
Semiconductors had bottomed in December and had avoided falling to new lows
until this week. The pattern breakdowns are evident throughout the SOX, and one
of the most negative-looking charts is Intel.
You’ll notice that the support levels for both the SOX and Intel were long-term
support, and that is what makes the move Wednesday take on some ominous
ramifications — to the average trader.
There’s one important thing that I learned from Jeff Cooper that
helps me to see this in the proper perspective. What is obvious is often a trap.
The public see the obvious and they get sucked into it. Support and resistance
are not always black and white. Bungee moves do and often occur when you’re
looking at the longer-term time frames.
So — follow-through to the downside? Maybe. But if your
hairdresser knows this for sure, you better set your stops real tight.
Until Thursday,