Semiconductors are the backbone of modern electronic equipment and also comprise an ever-increasing weighting in many investors' portfolios. In this article, we'll take a look at several charts from across the niche subsector and try to determine how traders will be positioning themselves over the weeks or month ahead.
iShares PHLX Semiconductor ETF (SOXX)
Many active traders seeking exposure to niche segments such as semiconductors often turn to exchange-traded funds such as the iShares PHLX Semiconductor ETF (SOXX). For those who are unaware, this popular fund provides targeted access to 30 U.S. companies, which focus their business on the design, manufacture, and distribution of semiconductors.
Taking a look at the chart below, you can see that the price has bounced sharply from its March low and the anticipated support from its 200-day moving average. Recent momentum has also triggered a break above the 2020 swing high of $267.85, which has also triggered a bullish crossover between the 50-day and 200-day moving averages (shown by the blue arrow), which is a common sign used by followers of technical analysis to mark the beginning of a major uptrend. From a risk-management perspective, stop-loss orders will most likely be placed below $235.51 to protect against a sudden shift in fundamentals or market sentiment.
QUALCOMM Incorporated (QCOM)
As the top holding of the SOXX ETF, QUALCOMM Incorporated (QCOM) will likely be one of the semiconductor companies that catches the focus of many traders over the weeks ahead. As you can see from the chart, the price has recently broken above its 200-day moving average and has also triggered a bullish crossover between the long-term moving averages (shown by the blue circle).
The popular buy sign, also known as the golden cross, will likely be a catalyst for a continued move higher over the coming few weeks. Stop-loss orders will most likely be placed below $83.30 or $80.88 to protect against a pullback, depending on risk tolerance and investment horizon.
Intel Corporation (INTC)
As one of the best-known semiconductor companies and a top holding of the SOXX ETF, Intel Corporation (INTC) also looks well positioned to make a move higher over the coming weeks. The period of consolation near the 200-day moving average will likely be used by traders to suggest that the bulls are in control of the long-term trend, and many will likely use the nearby support as a guide for placing buy and stop orders.
Based on this pattern, buy orders will likely be placed as close to current levels as possible to take advantage of the risk/reward while also protecting against surprise shifts in sentiment by placing stop-losses below $57.61. Traders will also likely use the bullish crossover between the moving average convergence divergence (MACD) and its signal line (shown by the blue circle) as confirmation of a likely move higher.
The Bottom Line
The byproducts of the work being done in the semiconductor sector provide modern-day society with the key pieces of technology that span every major facet of many people's lives. Based on the charts discussed above, it is apparent that this niche sector is gaining momentum and earning a prevalent position in the portfolios of many active traders.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.