At Tricio we like to look at charts in order to gauge market sentiment and investor action.
We looked at the computer semiconductor sector a few weeks ago by focusing on the PHLX SOX index. In summary, we noted that the sector remains in a broad uptrend and while things were frothy, the gains looked to extend. The 50-week moving average (blue line in the long-term chart below) was important near-term support to hold ahead of the rising support lines.
The SOX chart below is a weekly semi-log chart in order to show percentage moves over the long-term. So far, so good as the 50-week moving average did hold up on the last downswing and the index is bumping higher again. New all-time highs could be seen, which would ease worries that this is a potential head and shoulders sort of top forming!
The index is weighted by market cap so NVIDIA, Broadcom, Advanced Micro Devices, Taiwan Semiconductor, Texas Instrument, Qualcomm and Marvell Technology make up over 40% of the holdings. The recent gains by Intel are impressive on a percentage basis, and the weight in the sector index is increasing again.
The short term weekly chart of the SOX below shows the test of rising line resistance and key highs. Dips still need to hold above the 50-week moving average to keep the positive momentum intact, and the flat red line marks key near to medium term support to watch.
The chart below is the weekly chart of Intel (INTC) with the relative strength line vs. SOX on top (red line). This just shows that the share has really underperformed the index for some time – but it is starting to improve.
We noted in our previous blog that the falling share price was back to levels seen over a decade ago and this seemed to be concentrating minds at the company. A big hurdle was the $25/$26 resistance cluster, which is now being recovered. This should allow the share price to shift towards $29 (key gap on the daily chart) and then the 50-week moving average near $34 could follow. Again, catching falling knives is not a sustainable way to invest. This knife seems to be bouncing a bit, and could be reversing the bear trend. The falling line (red) comes in near $47 for those looking for a potential target further out.
Gerry Celaya
Chief Strategist
Comments