Software Surge, Versus Semis At Least:
Ratio charts are a great way to measure how different instruments are acting against each other. Sometimes however the strength in one is magnified by the weakness in the other. This could be the case in the chart below, contrasting the software and semiconductors. Looks sometimes can be deceiving, as here it looks like the software space if screaming higher, but names like SPLK ADSK and ZM all fell hard last week. The SMH is undergoing big distribution the last 3 weeks, and it was not helped by large downside drops last week in ASML AVGO LRCX QCOM. Perhaps software is not as strong as it seems and earnings this week by giants ZS OKTA WDAY VEEV and PANW to name a few will be telling.
“Old Tech” Titans Bifurcating:
The tug of war between AMD and INTC has been ongoing for decades as they vie for semiconductor supremacy. Of course over the years other leaders have made their presence felt like AVGO, XLNX and NVDA (each now down 21, 28 and 51% from their respective highs). AMD now trades 15% off its own highs, while INTC is now 27% from its recent peak. The latter is currently on its first five week losing streak in more than 5 years. On the AMD WEEKLY chart one can interpret it as a cup with handle, or bull flag. A break above latter scenario would see the stock nearly double as its measured move.
Examples:
The semiconductors as a whole have been acting a bit soft and getting softer. The SMH registered its second straight CLOSE below the very round par figure and its 200 day SMA, and trade has been elevated during the downdraft. Below is the chart of AMD and how it appeared in our 5/16 Technology Report. This illustrates the importance of CLOSING prices as our stop was 26, which held nicely on 5/23. This name surged today, and the round number theory comes into play here as 30 stopped it cold on 4/3. A challenge and break above that level now however would be a WEEKLY cup with handle pattern more than 9 months long.