SMH Weekly Update (post split)

NASDAQ:SMH   VanEck Semiconductor ETF
I'm updating my prior SMH weekly chart, since we had a 2 for 1 split in SMH last week and it totally messed my chart up.

Key points (dates are all weekly):

3/27: 131.79 (most recent peak)
4/24: 118.57 ( most recent low) -10.03% off the peak
5/1 close: 124.38 -5.6% off the peak
Gann confluence line 1: 121.71 -7.6% off peak
Gann confluence line 2: 114.46 -13.1% off peak

The green trend lines indicate an apex forming right along the Gann rays (salmon colored lines) suggesting a directional resolution is near.

After extending to the purple point D, which is almost a 1.218 Gartley extension, support appears to be holding at the 121.71 Gann Confluence support line. This line is also the top ridge of the Ichimoku cloud which can also serve as support. Should SMH rise off this support, then we would have had a 7.6% correction off the most recent high.

Should current support break down, we would see a target of Gann support 2 which is 114.46, or 13.1% off most recent peak.

Pros for upside breakout: A possible rate cut currently being predicted by SOFR futures as early as June or July. Banking turmoil could also call for a pause or cut. A reduction in rates would also signal easier monetary conditions which would benefit growth oriented stocks for a near term spike.

Pros for a breakdown: Further hawkishness in the FED, combined with Bank Solvency fears. Seasonality: from 2004 to 2023 the SMH has finished the month of June higher only 42% of the time, the worst month in the year.

Observation: The 12 month RSI, while positive at 57.16, is declining from a near term double top, and showing some weakness in trend. I would watch for continuing weakness in SMH momentum on the daily chart, as well as the breadth inside the SMH holdings. You can do this with flipcharts on the Barchart.com site. Presently, while I see a few stalwarts, I am also seeing a lot of breakdowns inside the SMH ETF. For example, MCHP, a very well run company with solid financials, just reported good earnings beats, yet it sank below its 200 day MA and has a weak daily RSI(9) of 42.11. Personally, I would not long any semiconductors until late summer and signs of turmoil have resolved.

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