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The Winter of 2018 Seen Quite the Massacre of Chips and Semis Stocks; But They’ve Been Full #Bull Since, Straight Through 2019, Rocketing Into The New Decade. 🚀
By the end of 2018, the current leader of the Chip & Semi bull run, Nvidia Corp (NASDAQ: NVDA) dropped approximately 57% in 83 days, due to the doom and gloom dominating the headlines, with analysts’ downgrades, compounded by bleak earnings guidance and reports. The company has bounced back as much as +116% since, over the last 13 months, just hitting a New 52-Week High of $253.59 per share today.
In comparison to the former, trading the market through 2018 via the VanEck Vectors Semiconductor ETF (NASDAQ: SMH), was a much wiser decision. It only took a 25% plunge into the end of 2018, before finally finding a bottom in late December of 2018. Fast forward just 12-13 months, and the SMH has rallied back 83%; and the upgrades just keep on coming, with buyers piling into the same names that just capitulated a little more than one (1) year prior.
Let’s Have a Look at the Charts, Starting with the Weekly, for Some Guidance & Foresight Into Where and When this $SMH Bull Run ⚠️ May Hit Some Trouble:
Some Factors to Consider, While Analyzing $SMH:
- The RSI is signalling overbought conditions. There is still room to run to historic highs, but a slight reset would be so much healthier in the long term.
- The most recent price action could be described as parabolic, and such moves usually end with pain for latecomers to the party.
- Volume has also been in a steady decline, unlike the price action.
- Currently, there is a confluence of resistance at the $148 region, which could prove to be a make or break level.
- Stochastic is overstretched and in desperate need of a pullback as is the MACD.
- Despite the price galloping higher, the Histogram is beginning to tick lower, a clear sign that a trend change may be coming for SMH.
For the Longer-term Trader/Investor:
This SMH timeframe, on the Monthly chart, paints a much healthier picture; where we can see that the Chips and Semis sector has broken out from a 19-year long base. Using Fibonacci expansion levels, it looks like $160 and $194 are the levels to keep in mind. We are seemingly at the beginning of a new cycle within the price action, as the world enters in a new era of technological advancement in Artificial Intelligence and Augmented Reality.
Other Crucial Info:
Earnings season is upon us and expectations are still extremely high for SMH and the entire Chip and Semiconductor sector. If the kingpins of the Chips and Semis were to disappoint in any way, then the floodgates could open as sellers decide to bank huge gains from 2019; so take this as a friendly reminder: don’t be greedy and be left holding the bag.