ChartWatchers

HAVE THE SEMICONDUCTORS BECOME "DEAD MONEY"?

Chip Anderson

Chip Anderson

President, StockCharts.com

The technology rally from July-to-present has occurred without the participation of the Semiconductor Index ($SOX). We find this rather "odd" to be sure, for one of the basic tenets of any broader market rally were that they were led in general by the technology sector, and more specifically the "high-beta" semiconductor industry. That hasn't been the case recently however, for the semis have lagged rather badly , and the question before us is whether they are "dead money" or not. A reasonable question we think.

$SOX

Our opinion: the semis are poised to trade sharply higher...if...if they can get some "gitty up and go" behind them to breakout of either the ugly "head & shoulders" pattern or the more "neat" pennant formation. It matters not to us which pattern; we are only concerned with the results once trendline resistance is given...whether sharply higher prices materialize as anticipated. We give this more than a 50/50 chance given major support at the 200-week moving average held and turned prices higher; with the 20-week stochastic poised to reverse higher from "postive numbers". This would imply "strength", which would target nearly a 100% rally over the course of the next several years. And of further support to our thesis, the Semi/S&P 500 and Semi/NASDAQ 100 relative ratio charts are turning higher as well.

Therefore, we are carefully watching semiconductor price action, for we feel they are poised for a major breakout...with our favorite individual stock being Lam Research (LRCX).

Want more of Richard's award-winning advice? Check out his Web site: TheRhodesReport.com

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More