Semiconductors giveth, semiconductors taketh. After leading the broader market to new highs, semiconductors have taken a notable step back in the past couple of trading days and now reside among those sectors leading the way to the downside.
Semiconductors giveth, semiconductors taketh. After leading the broader market to new highs, semiconductors have taken a notable step back in the past couple of trading days and now reside among those sectors leading the way to the downside. Monday’s down 4% day for the NDW Semiconductors Index (DWASEMIS]) follows Friday’s 3% down day and affected the near-term technical health for the sector.
As semis have pulled back, the bullish percent for the sector ^BPSEMI, which measures the percentage of stocks maintaining a buy signal on their default point and figure chart, has fallen from the 80% down to just above 50% as of Monday’s close. While still suggesting more than half of the stocks within the sector maintain a buy signal, the past two trading days (Friday and Monday) have seen the indicator decrease by over 20%, ranking among the top 20 (out of 7000+ two-day periods) largest two-day drops in history going back to the beginning of 1998. Individually, Friday and Monday – along with last Tuesday (5/12) – rank among the top 100 in terms of one day drops. While that may seem alarming at first, context is key and remembering that the rallying within semis during April was historic, so it was not too surprising to see a quick consolidation after abrupt improvement.
For further context, below are two stocks that have both returned to sell signals, but their technical pictures in response to recent downside have been different.
Micron Technology (MU) returned to a sell signal during Monday’s (5/18) trading as shares fell to $664. This comes after the stocks moved to new highs above $800 and extended into highly overbought territory. Even with the sell signal and pullback, MU continues to maintain 5 technical attribute rating and rank among the top quintile of the stocks within the semiconductors sector matrix. Additionally, the stock continues to maintain an overbought position with a Weekly OBOS reading north of 80%, so those seeking exposure to MU will look for a further pullback and then return to a buy signal or continued consolidation within the current price range before considering.
On the other hand, while maybe not as well known as MU, Credo Technology Group (CRDO) is a prime example of a stock that has seen additional technical deterioration along with a return to a sell signal. CRDO broke a triple bottom at $182 on 5/14 before seeing shares continue lower, falling to $150. Although still maintaining a positive trend, CRDO has seen both the market and peer RS charts reverse into Os during Friday and Monday’s trading, indicating near-term underperformance and dropping the stock down to an unacceptable 2 for 5’er. With prior resistance in the $130 to $140 range appearing as the closest levels of potential support and the recent technical deterioration, CRDO is likely one investor are looking to step away from if not already done.
