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Market Outlook

Chart of the week – Potential recovery for US semiconductor stocks (SOXX)

Chart of the week – iShares PHLX Semiconductor ETF (SOXX)

Potential recovery for US semiconductor stocks (SOXX)

Medium-term technical analysis

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click to enlarge chart

Time stamped: 22 May 2021 at 1:00 pm SGT

Source: CMC Markets & TradingView

  • Since its recent all-time of 449.73 printed on 5 April, the iShares PHLX Semiconductor ETF (SOXX), an exchange trade fund that consists of the 30 major US semiconductors stocks has declined by -14% to print a low of 386.03 on 13 May.
  • Several key technical elements are now advocating for a potential recovery in the SOXX; from fractals analysis /Elliot Wave perspective, the entire price movement from these dated  swing points (16 February 2021, 9 March 2021,  5 April 2021 & 13 May 2021) can be considered as a likely a-b-c flat/sideways configuration with the potential terminal/end point of the sideways configuration at the 386.00 level that confluences closely with the 1.00 Fibonacci expansion of the down move from 16 February 2021 high to 9 March 2021 low projected from 5 April 2021 high and the 0.764 Fibonacci expansion of the most recent decline from 5 April 2021 high to 4 May 2021 low projected from 7 May 2021 high.
  • The 4-hour Relative Strength Index (RSI) has shaped a bullish divergence signal at its oversold region which indicates that the recent downside momentum has eased, and price action may be due for a short to medium-term bullish reversal at this juncture.
  • The ratio charts of SOXX against the benchmark S&P 500 (SPY) and its S&P Information Technology Sector (XLK) has indicted recent outperformance of SOXX since 19 May.
  • If the 386.00 key medium-term pivotal support holds and a break above 419.50 (the pull-back resistance of the former major ascending support from 18 March 2020 low), SOXX may see a potential impulsive up move sequence to retest its all-time high swing area of 443.97/449.73 in the first step.
  • However, a daily close below 386.00 invalidates the recovery scenario for an extension of the corrective decline towards the next support at 367.00.