Semiconductors are an essential part of our daily lives, a geopolitical football of national security interests, and chips are increasingly in demand.
Meet Sister Semiconductor (SMH), also known in trading circles as the VanEck Semiconductor ETF (SMH). SMH potentially indicates new leadership in the beaten-down tech industry.
Today, institutional investment managers released their 13 F filings and sometimes disclosures provide insights. Warren Buffett’s Berkshire Hathaway (BRKB) disclosed today that it bought a $4 billion stake in Taiwanese chip giant TSMC (TSM). Why is this significant?
Many semiconductor companies outsource the manufacturing of their components to TSMC. TSMC is also the No. 1 holding in the VanEck Semiconductor ETF (SMH) and a Taiwanese firm which brings additional geopolitical risk. SMH is breaking out of a consolidation pattern; it is about to regain the 200-day moving average and closed just below it.
SMH crossed the 50-day moving average at the beginning of the month, and we might see a significant shift in the chip market if SMH can cross the 200-day moving average and hold this higher price level.
The Real Motion Indicator and Triple Play Indicator on SMH show that the momentum, price, and volume trends indicate potential bullishness. The Triple Play indicator is a strong signal of market leadership, but SMH is also running rich on the Real Motion Indicator. This could lead to a breakout above the 200-day moving average, but this could also be a risky trade as SMH is subject to potential mean reversion.
So far, the bear market in semis has lasted longer than expected, so traders need to keep an eye on these indicators to position trades correctly. Keep an eye on SMH to have a better understanding of where technology and the semiconductor business are headed next.
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- S&P 500 (SPY): 396 support and 402 resistance.
- Russell 2000 (IWM): 185 support and 188 resistance.
- Dow (DIA): 333 support and 339 resistance.
- Nasdaq (QQQ): 286 support and 293 resistance.
- KRE (Regional Banks): 62 support and 67 resistance.
- SMH (Semiconductors): 221 support and 229 resistance.
- IYT (Transportation): 227 support and 233 resistance.
- IBB (Biotechnology): 133 support and 137 resistance.
- XRT (Retail): 64 support and 69 resistance.
Chief Executive Officer
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.