Intel An SMH Distraction?

The semiconductors are putting in their worst week of 2019 down almost 6% heading into Friday. The SMH has fallen everyday this week, but to its credit it did CLOSE above its 50 day SMA Thursday recording a bullish hammer candle. Volumes trends are worrisome, and the spinning top WEEKLY candle ending 4/26 off the round 120 number, is so far astute in predicting a reversal of the prevailing trend. A big drag on the ETF is INTC, which is almost certain to undergo a 3 week losing streak down nearly 10% so far. The largest component also fell more than 10% the week ending 4/26, and a red flag was the quick reversal after such a promising break above a cup base pivot of 57.70 the week ending 4/19. We know the best breakouts tend to work right away, but perhaps its weakness is hiding the strength in leading semis within the SMH. I believe the latter.

“Old Tech” Nordic Knockdown:

Over time creme tends to rise to the top. The meaning of the first sentence explains “a good person or idea cannot go unnoticed for long”. Well below is the ratio chart comparing ERIC to NOK. ERIC is stepping up, and its outperformance is certainly helping, but the weakness of NOK is contributing a lot as well. It is on a 3 week LOSING streak down more than 13%, and this week is following through lower by  another 4.2%. It is lagging badly on a YTD basis down by 15%, while ERIC is higher by 4% (over the last one year period the contrast is even starker with Ericsson up 16% and NOK down 22%). ERIC recorded a bullish harmai cross Wednesday, but was negated today. I still think this is a good entry with a stop below its 200 day SMA, a line it did NOT undercut late last year when the vast majority of names did.

Examples:

Good things take time. It also applies to stock charts. A good example is the chart below of ATUS, and how it appeared in our 5/6 Technology Report. Tops in individual names, or indexes tend to show very wide and loose trade in a volatile fashion. Bottoms are just the opposite as they should be rounded and formed patiently. If it does so gradually, even better. As we see on the WEEKLY chart of ATUS here, the bottom in the current cup base took its time dating back to the beginning of January ’18. It broke above the cup with handle pivot off 22.64 a month ago and most breakouts are retested. This one is no exception, and look for a grind higher from this broadband play.

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