January 24, 2022


Technical Analysis of Financial Markets

Semiconductor Breakout Alert

Semiconductor Breakout Alert

A group of stocks traders and investors alike tend to keep a close eye on is that of semiconductors. Their widespread use in all industries and the companies that manufacture and test them are considered to be barometers of the health of the overall economy. Yesterday Applied Materials (AMAT) and Lam Research (LRCX), two major stocks in the space got ratings boosts after Goldman Sachs broadly turned positive on companies that make equipment on chipmakers. The rest of the group followed suit as we can see from the top performing industry groups yesterday:

OmahaCharts - Semiconductor Breakout Alert

I think their relative strength is setup nicely to continue in the coming months. Take a look at SMH as a group relative to the broad market index, SPY:

OmahaCharts Two - Semiconductor Breakout Alert

This pattern is known to be one in which a breakout is imminent in the direction leading up to it. Pay attention to this ratio chart in the coming weeks as it could allude to a potential U.S. / China trade deal.

Trent J. Smalley, CMT