Tuesday, May 12, 2009

Semiconductors (SMH)

I bought some SMH in aggressive accounts today. I want to show you the setup.
SMH retraced 38% of the recent rally, or -11.2% in 4 days.
Price got extremely oversold today, with Stochastics on the Hourly Chart falling to a reading of 9. This indicator had only been this low on five other occasions during the move off the March lows. The other five saw decent rallies in a very short period of time.

Remember, that $19 is also highs of January and February 2009, as well as the breakout point in March 2009.
$19.06 is the 50-day moving average.

So you had a very oversold chart, at critical support. It was worth an aggressive position, with a close stop.

With announcements out of Intel and earnings from Applied Materials due after the market today, I was not willing to buy large positions. Cisco got creamed last weak on supposedly good numbers.

The NASDAQ continues to lag badly. The NASDAQ normally leads, both up and down. We’ll see how things trade tomorrow.

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