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Featured Trade (U.S ETF): Bullish exhaustion seen in U.S semiconductor sector

Medium-term technical outlook (1-3 weeks) on PHLX Semiconductor Sector (SOXX)



click to enlarge charts

Key technical elements

  • The PHLX semiconductor sector is one of the two outperforming sectors that has led the on-going recovery seen in the U.S. stock market since 26 Dec 2018. Its ETF (SOXX) has staged a rally of 30% from its 26 Dec 2018 low of 144.79 to print a high of 189.23 on 25 Feb 2019 versus a 19% rally seen in the S&P 500 in the same corresponding period.
  • Interestingly, the SOXX has staged a bearish reaction right at its 186.08/190.90 major resistance zone yesterday, 26 Feb which is defined by the descending trendline from its 13 Mar 2018 all-time high, the pull-back of the former major ascending trendline support from Feb 2016 low and a Fibonacci retracement/expansion cluster.
  • Interestingly, the push up in price action from its 26 Dec 2018 swing low of 144.79 has been accompanied by decreasing volume. This is a stark contrast with the previous similar fractal sell-off seen from Jun 2015 to Feb 2016 where the rebound in price action from its Feb 2016 swing low has been accompanied by increasing volume before the SOXX staged the bullish breakout from the trendline resistance (see weekly chart).
  •  In addition, the daily RSI oscillator has staged a bearish divergence signal at its overbought region. These observations suggest that upside momentum of the on-going medium-term rebound has started to wane.

Key Levels (1 to 3 weeks)

Immediate resistance: 186.08

Pivot (key resistance): 190.90

Supports: 178.80 (trigger) & 167.10/165.30

Next resistance: 197.50/198.84

Conclusion

The on-going up move seen in the SOXX has started to display signs of bullish exhaustion. If the 190.90 key pivotal resistance is not surpassed and a break below 178.80 (the ascending trendline from 26 Dec 2018 low) is likely to trigger a potential down move to target the 167.10/165.30 support in the first step (50% Fibonacci retracement of the entire up move from 26 Dec 2018 low to 25 Feb 2019 high & congestion area from 01 Nov 2018/18 Jan 2019).

However, a clearance above 190.90 invalidates the bearish scenario for a further rally to retest the current all-time high swing high area of 197.50/198.84.

Charts are from eSignal





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