The Semiconductor Fund Fell 7% Wednesday
The iShares Semiconductor ETF (SOXX) experienced a significant 7% decline on Wednesday, sparking concerns among investors regarding the future of chipmakers in the face of potential U.S. trade restrictions and geopolitical tensions. These worries persist regardless of the outcome of the upcoming November presidential election.
Key Takeaways
1. The iShares Semiconductor ETF slumped 7% on Wednesday amid growing concerns that chipmakers will face heightened U.S. trade restrictions and geopolitical tensions, irrespective of which candidate wins the November presidential election.
2. The ETF remains in a long-term uptrend, but more recent technicals points to weakening buying momentum.
3. During retracements, the fund may encounter support at key chart levels including $230, $180, and $148.
4. A bars pattern projects a price target of around $292 based on the fund’s impulsive move higher from October 2023 to March this year.
Technical Analysis Indicates Weakening Momentum
The SOXX ETF has been on a steady uptrend since bottoming out just below the 200-week moving average in October 2022. Investors have been utilizing dips as buying opportunities, driving the price higher over time. However, recent technical indicators suggest a potential weakening in buying momentum, signaling a possible exhaustion of the trend.
As the ETF reached a record high last week, the relative strength index (RSI) showed a shallower increase, forming a bearish technical divergence. Additionally, trading volumes during the fund’s recent upward movement have been trending lower, indicating a potential shift in market sentiment.
Key Support Levels to Monitor During Retracements
In the event of further retracements in the ETF’s price, investors should pay attention to three critical support levels on the chart. The first support level is around $230, where buying interest may emerge near a peak that marked the end of an impulsive trending move between October 2023 and March this year.
If the price falls below $230, the next significant support level is at $180. This level is likely to attract buyers as it aligns with a horizontal line connecting two prior record highs from January 2022 and July 2023. Additionally, this region corresponds to the respected 50% Fibonacci retracement level when considering the price movement from the October 2022 low to this month’s high.
Further downward movement could lead to a retest of around $148, where buyers may seek entry points near a trendline linking multiple peaks and troughs from February 2021 to October last year.
Upside Price Target to Watch
In case of a minor pullback followed by a resumption of the uptrend, investors should keep an eye on the $292 level. This upside price target is projected by applying a bars pattern from the fund’s impulsive move higher from October 2023 to March this year to April’s swing low. It indicates a potential area where the ETF may encounter selling pressure, especially if other technical indicators signal overbought conditions simultaneously.
Disclaimer: The information provided in this article is for informational purposes only. The author does not own any of the securities mentioned. Readers are advised to conduct their research before making any investment decisions.
In conclusion, the recent decline in the Semiconductor Fund highlights the uncertainties surrounding chipmakers in the current economic and geopolitical landscape. By monitoring key technical levels and indicators, investors can better navigate potential market fluctuations and make informed decisions regarding their investment strategies.
Source: Investopedia
