SOX Index Has 3 Big Holes

 | Apr 24, 2018 | 3:13 PM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:






The Philadelphia Semiconductor Index, or the SOX Index (SOX or $SOX) has been "rolling over" since November. This is a large potential top formation and can mean a large potential decline in the weeks ahead. Let's drill down in the charts and indicators to see what we can glean.

In this daily bar chart of the SOX, below, we can see a rising "neckline" connecting the lows in December, February and April. Even though prices made higher highs from November to January to March, the Moving Average Convergence Divergence (MACD) oscillator made lower highs. Price momentum weakened from February to March and the SOX is testing its rising 200-day moving average line. The shorter 50-day average line has been weakening since the end of March. The MACD oscillator is below the zero line and in a bearish configuration.

Math-driven indicators are not on the side of this index. When we looked at the top three components of the SOX (Texas Instruments (TXN) , Xilinx, Inc. (XLNX) and Maxim Integrated Products (MXIM) ) we found a similar bearish pattern with prices on the verge of breaking their February lows.

In this weekly bar chart of SOX, below, we can see that prices are testing the rising 40-week moving average line. The weekly MACD oscillator has been rolling over with lower highs despite the higher price highs since November. The 12-week momentum study shows a bearish divergence from November to March with weaker momentum readings compared to higher prices.

In this Point and Figure chart of the SOX index, below, we can see a top pattern with a $1,131 downside price target.

Bottom line: The charts of a number of semiconductor stocks have been rolling over for months. It looks like the bears have finally gotten the upper hand. I would look for the SOX to decline to the $1,131-$1,100 area -- a combination of the Point and Figure target and chart support from June-August.

Columnist Conversations

I recently highlighted WBA as one of the best values available in today's market. Walgreens ...
This trade is NOT for everyone (GE) came very close the 3/26 low @ 12.73 Gaps lower has been a recent daily e...
The support I needed to hold in XLB did not, so the trade is a bust......There may be some lower support at th...
British American Tobacco (BTI) is trading near multi-year lows, yielding 5.6% and about to ex-dividend on June...



News Breaks

Powered by
Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.