Chipmakers like Nvidia, Micron, and Broadcom have had a little bit of a rough ride lately. But when you look at today’s chart of the iShares Semiconductor ETF (SOXX), there seems to be some hope in sight.
Now, there are all kinds of fundamental factors that could be driving this, from talk about the upcoming Anthropic IPO to the latest news about chip demand from Meta, SpaceX, and more.
Let’s focus on the chart to see how to best navigate this potential short-term bottom that could lead to something more significant.
SOXX Tests a Key Support Level
Looking at the daily chart of SOXX, you can see that it has declined off the October 2nd high at 596.44.
This has brought shares back to the key July 29th range, with a low at 464.08, which has supported price action for months.
In addition, the latest price action has come down to test the midpoint of that July 29th range, at precisely 480.07.
And here’s the interesting thing.
Sure, SOXX traded below that midpoint on October 22nd and closed below that 50% level. But the very next day, it started to stabilize. And today, we’re trading back above that 50% level.
So that’s the price factor I’m first seeing as a sign of key support.
Momentum Is Chiming In, Too
Now, momentum is chiming in as well!
There’s an established Bull Bear RSI Face Off pattern happening right now, suggesting short-term upside.
You can learn more about that in my Bull Bear RSI Face Off. And I go deeper into these concepts in my Four Zones RSI Coverage System.
But how would we monitor this to know whether it’s actually the beginning of a new substantial move higher versus just a little short-term recovery?
The Key Price Levels I’m Watching Next
The key is monitoring the downtrend we’ve had since October 2nd.
When you look at the lower highs in place, the most recent lower high shaping that move was on October 21st at 513.08.
If price action can get above that level, that would be a good sign. I’d then be looking for further upside toward the 565 area over the coming weeks, at the least.
However, if the current short-term recovery doesn’t get above that October 21st high, I’d watch out for another potential slight push lower to revisit that key July 29th low at 464.08.
And if that July 29th low gets violated, then the next downside target would be the April 28th low at 431.74.
That’s what the chart’s showing at this moment. We’ll see what unfolds from there!
🗓️ P.S. Join Me LIVE Tomorrow for a Trading Town Hall!
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