Traders, Keep an Eye on Chip Stocks


Semiconductors have been a weak spot in technology for most of the year. But now the group may be trying to break out.

The Market Vectors Semiconductor ETF (SMH) is challenging an old peak from earlier this month. It comes at a time when the broader technology sector and Nasdaq-100 index have pushed to new highs.

Despite strength in other areas, SMH has done almost nothing since failing to break out in March. It’s up just 3 percent in the last six months, which is less than the overall S&P 500.

President Trump’s trade disputes have been one reason — especially because China is a key market for microchips. There have also been worries about semiconductor-equipment firms like Applied Materials (AMAT) and Lam Research (LRCX).

However, some key names like Nvidia (NVDA) and Advanced Micro Devices (AMD) have recently shot to new highs. Micron Technology (MU), a stalwart for TradeStation clients, is also muscling back from lows as investors prepare for quarterly results on September 20.

Did you see the rally in Pandora Media (P) after this key level was broken?
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Getting back to the charts, our weekly Market Action webinar has focused on $109.40 as a potential breakout level on SMH. It closed slightly above that level yesterday and is flirting with it again today. It hasn’t yet clearly broken out, so traders may want to be on guard for a potential pullback and retest of the recent range. But given the overall bullishness in technology, they also shouldn’t be too stunned if it melts higher and buyers stampede in.

Disclaimer: This post is intended for educational purposes and shouldn’t be interpreted as a trade recommendation.

Market Vectors Semiconductor ETF (SMH) with key level around $109.40 marked.
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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.