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Key Takeaways
- The iShares Semiconductor ETF slumped 7% on Wednesday amid growing concerns that chipmakers will face heightened U.S. trade restrictions and geopolitical tensions, irrespective of which candidate wins the November presidential election.
- The ETF remains in a long-term uptrend, but more recent technicals points to weakening buying momentum.
- During retracements, the fund may encounter support at key chart levels including $230, $180, and $148.
- A bars pattern, which takes the fund’s impulsive move higher from October 2023 to March this year and applies it to April’s swing low, projects a price target of around $292.
The iShares Semiconductor ETF (SOXX) slumped 7% on Wednesday as investors locked in profits amid growing concerns that chipmakers will face heightened U.S. trade restrictions and geopolitical tensions, irrespective of which candidate wins the November presidential election.
Below, we take a closer look the fund’s weekly chart while also pointing out important technical levels to watch out for amid uncertainty surrounding the sector.
Technicals Signal Weakening Momentum
Since bottoming out just below the 200-week moving average in October 2022, the SOXX ETF’s price has trended steadily higher, with investors using dips as buying opportunities.
Despite the bullish longer-term price action, more recent technicals on the chart signal weakening buying momentum, potentially indicating a tiring trend.
Firstly, as the ETF set a record high last week, the relative strength index (RSI) made a shallower higher to form a bearish technical divergence. Secondly, during the fund’s most recent leg higher, trading volumes have, for the most part, trended lower.
Monitor These Key Areas During Retracements
Amid further retracements in the ETF’s price, investors should keep an eye on three key areas where it may encounter support.
The first level sits around $230, a location on the chart that could attract buying interest near a peak that marked the end of an impulsive trending move between October 2023 and March this year.
A close below this level may see the fund fall to the key $180 level, where it would likely find significant support near a horizontal line connecting two prior record highs that formed in January 2022 and July 2023. Interestingly, this region also roughly aligns with the respected 50% Fibonacci retracement level when stretching a grid from the October 2022 low to this month’s high.
Further selling could lead to a retest of around $148, a region where buyers would look for entry points near a trendline linking multiple peaks and troughs from February 2021 to October last year.
Watch This Upside Price Target
If the ETF only has a minor pullback before moving higher, investors should monitor the $292 level.
We project this upside price target by taking the bars pattern from the fund’s impulsive move higher from October 2023 to March this year and apply it to April’s swing low. This provides a general area on the chart when the ETF may run into selling pressure, particularly if other technical indicators are pointing to overbought conditions at the same time.
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As of the date this article was written, the author does not own any of the above securities.