Chartsmarter Insights

Semis Ready For Another Thrust? The semiconductors have a good stickiness feel to them as they attempt to climb above a bull flag pattern on the ratio chart against their software peers. We mentioned recently how bullish the three very taut WEEKLY consecutive closes were between the weeks ending 7/10-24, with each CLOSING within just .75 of each other. AMD has been a standout, at INTC's expense, NVDA continues continues to lift off the very round 400 number. IPHI did record a bearish reversal today after earnings, but it too has been a leader. ACMR should be on investors radar with a double digit WEEKLY gain already, and this is excellent follow through after the prior week jumped 13%. I still think one should overweight semis compared to software as the ratio chart below suggests. But most likely both will act well going forward, as evidenced by FLSY TDOC DOCU and SHOP. The Nasdaq overall is extended, but it did CLOSE above the 10800 number I was concerned about recently. FANG is not holding up its end of the bargain as AMZN GOOGL and FB are cooling off here. Once they catch their breath, expect a potential surge above the very round 11000 figure.

Biotech Sluggish: The biotech group is at a crossroads. It has taken a well needed breather, and is now a rapid 10% off most recent all time highs. The XBI is lower 7 of the last 9 sessions, and is testing its rising 50 day SMA. If the line does not hold, it is slightly below it, a move toward the very round par number could be in the cards. That could happen in a flash, or not at all, but there is good reason to believe the 100 level would hold, as it was resistance for a long time prior to jumping above it in early May. Best in breed names in the space are not surprisingly clinging to familiar areas of support. SGEN and BMRN are finding support at their upward sloping 50 day SMAs, and teetering near correction mode off 10% from most recent 52 week highs. INCY seems to be losing its battle with the very round par number, something ABBV did a couple weeks ago. TWST was stopped at 60, a level to watch as it trades between 50-60. REGN the general of the group continues to swim comfortably above 600, an area it has to hold in my opinion. Below is the chart of the XBI. The June retest was a beauty, and July's is up in the air.

Collision Course Friday: We spoke earlier in the week how the semiconductors put up a very bullish pattern with the last 3 weeks CLOSING very tight. Breaks above that type of coiling action can be explosive, and this week so far the SMH is higher by nearly 5%. The semis at all time highs is a very positive development. That is basically double the advance that the IGV (software ETF) has put up heading into Friday. The chart of the Nasdaq below is showing the difficulty is has CLOSING above the 1800 level with a bearish engulfing candle there on 7/13, and another reversal there on 7/21 as PRICE action tested the top of the engulfing range. That is just what bears wanted to see, as it is common for a breakout or breakdown to be retested to confirm its validity. Now the bulls are salivating with overnight action regarding earnings reports, and a third time touching an area of caution in such a short space of time is NOT what the bears want to see. Bears will be twisting and turning tonight as this melt up could intensify, but if PRICE action wobbles into the CLOSE Friday, all bets are off. Buckle up.

Biotech Test: We used a quote awhile back that most companies are either are technology companies or they are becoming one, or being disrupted by one. Biotech names can be classified as such too, and look no further than the composition of the Nasdaq 100, with six components, including AMGN BIIB GILD VRTX REGN and ILMN, among the top 50 in the index. Some have obviously performed better than others, and BIIB the dog of the aforementioned names, filled in a gap on 7/24 from the 7/7 session, and jumped on 7/27 by more than 5%, but still resides below its downward sloping 200 day SMA, and 25% from most recent 52 week highs. Getting back to the XBI, which is now 9% off most recent all time highs, and the composition of this fund, now shows 2 of the 3 top holdings as vaccine players. NVAX currently sports a bull flag formation that began at the very round par number, and has a pivot of 150, meaning a break above carries a measured move to 200. INO the third top holding is now trying to hold the very round 20 number, as it has slipped 42% from highs made just one month ago. The XBI itself looks ready to test its upward sloping 50 day SMA. Do some of these names above hold the cure for keeping the fund above it?