This Group Acting Chipper, Pun Intended:
The semiconductors woes were well known with their weak relative strength beginning last March. But the winds of change may be in the air, witnessed by the ratio chart below compared to the Nasdaq. Notice that since hitting rockbottom in late October the group has been on the incline, and this week recorded a robust break above the upward channel it was trading within. The SMH still trades 15% off its most recent 52 week highs, and more names in the space need to show proper bases, but give credit for recent PRICE action. Many stocks in the arena are reclaiming their 200 day SMAs, which many market participants determine the major trend from.
Semiconductors Stirring The Pot:
The semiconductors are an extremely influential group, as they are in nearly every product one can think of. The SMH jumped 4.3% this week, outshining the Nasdaq that was up fractionally. This occurred with top component INTC DOWN 4.4% Friday. Others behaved much better after reporting, with double digit weekly gains recorded by XLNX, STM and LRCX. Below we revisit the ratio chart we highlighted in our 1/14 Technology Report. A break above this downtrend line could have big positive implications for markets.
I am a big believer in buying strength, but there are situations that can be taken advantage of with laggards. Below is a good example, with the chart of MU and how it was presented in our 1/22 Technology Report. Bears were most likely taking it for granted that resistance several times at the downward sloping 50 day SMA would hold. My belief is the more times a line is touched the softer that support/resistance becomes. Thursday it broke above the line gaining more than 6%, and Friday followed through with another 6% jump. Room to the 200 day is very possible.