Wall Street Has Shifted Back to Bullish on the Semis. Here’s How to Play a Rally.
Last week was the big freak-out in the semi names. This week, people are jumping back in. Will it be a straight line to new highs?
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market
I can’t believe it has been just one week since the freak-out we saw in the semis and tech stocks.
Last Monday evening, I highlighted the chatter. I asked you to bear with me on the anecdotal stuff because the list was long. There was the former semi analyst, now strategist, who had loved semis in June, but exactly one week ago, he did not like them; he liked energy!
Let me provide an update. Now he likes semis and believes stocks like Micron can double. I did not make that up.
A week ago, we saw cries about the head and shoulders top in the semis. Those cries have been silenced.
A week ago, the folks on Fast Money were bearish on tech/semis. Today they are back to bullish.
A week ago, the volume in ($SMH), an ETF to be long semis, surged, which I thought was a positive. I grant you, the SMH sits at just about the same price it was a week ago, having plunged for the ensuing two days before the rebound. My view remains the same: I doubt we will see the semis green every day, but overall, I believe folks will now see them as buys.
Notice that the SMH stopped right at resistance on Friday, but also notice that they opened down today and got bought. That 560 area is pretty important now. That’s where the downtrend line comes in, and it’s where SMH got stopped on Friday.
I think the window for a rally in tech remains open until we get back to an overbought condition. Thus far, I don’t have a timeline on when we could see tech/semis/Nasdaq overbought. I did not think we would see a straight-line rally, and thus far, only the QQQs have done so. The semis have been more fits and starts. Even if tomorrow is down, I think there will be another rally attempt before the week is out.
One last point is that while I saw a big shift in tech sentiment today (anecdotal) there was also quite a drop in the put/call ratio as it chimed in at .78, the lowest reading since June 12th.
New Ideas
Someone asked about buying Citigroup (C) about two weeks ago, and I wanted to see it develop a bit more of a bottom. I wanted to see a W. We might have gotten that last week. Over 135-ish and the stock starts to improve. A stop under 125 feels quite far away, though so use your own judgment.
Today’s Indicator
The 30-day moving average of the advance/decline line ought to work its way under the zero line in the month of August. That’s the ‘others’.
Q&A/Reader’s Feedback
Intuitive Surgical (ISRG) is trying to find a bottom but it’s early. There should be a little trouble if/when it fills this gap at 380 but I expect more trouble in the 400-420 area. If the stock can now trade back and forth in a one-hundred-ish point range (330-430) for a few months, we might finally be able to call this a bottom. In the near term though, I think that resistance stops it.
My only question on the chart of Amazon (AMZN) is whether this jumpy action is more like the green circle or the blue one. The blue one left an island down below (bullish), where the green one did not. This time there is a tiny little island down below. It’s obviously run too far for me to like it, but it hasn’t done anything wrong. I’d like to see some consolidation or at least a gap fill in that 273 area.
Meta (META) has been in a very wide trading range for almost a year now. I do like that the recent gap down did not make a lower low than March. But mostly it’s still trapped in the range. That means I think pullbacks toward the bottom should hold.
Let me begin this review of Honeywell Aerospace (HONA) by noting earnings are out on Wednesday, so it’s a gamble, something I do not like to do. The stock also has a very short history, which makes it tough. The best I can say is that if it can get up and over 220, it would improve the chart.
Nurtien (NTR) also has earnings out on Wednesday, so again, be aware of that. When we last checked in on it near the recent lows, I said I thought it was oversold enough to rally, but there was still work to do. I still feel that way. But for the first time since it formed that island top in March, I think the stock, should it fall to the low 60s, should start to hold and form a pattern. Having finally had a decent rally, it is beginning to improve.
