Is It Time To Put Your SOX On?
- Posted by Greg Harmon
- on April 12th, 2017
As I was putting on my socks this morning my mind started to drift. I found my self remembering last summer when I wore flip flops all the time. It is still a little too cold for that but now that I was in July of 2016 I realized something else about socks. Well, the SOX to be fair, but your brain rhymes things it does not spell. July 2016 was when the Semiconductor Index (SOX) broke out of a long base. I knew it had been rising since then but wondered about the path.
I grabbed my coffee and wander up to my 3rd floor office to take a look. A few significant things jumped out at me. First is that since that move started, the 50 day SMA has played a significant role. It touched its 50 day SMA 4 times from September through December on pullbacks, and each time it recovered and started back higher quickly. The Bollinger Bands® also played a role during that time. It touched or breached the lower Bollinger Band 4 times as well and reversed each time.
Over this 10 month run higher there have been peaks as well. They have tended to come at the upper Bollinger Band. The last one was via a consolidation and sideways motion away from the Bollinger Band that started a month ago. This morphed into a pullback. Which brings up to today. Tuesday that pullback reached both its lower Bollinger Band and the 50 day SMA. Its old friends supporting it along the way.
Will it bounce again? We will have to watch to be sure, but there are some supporting features in the chart that suggest it might. The candlestick printed Tuesday, a Hammer, is a potential reversal candle. Starting higher and selling off but then recovering by the end of the day shows intraday strength, buying the dip. While momentum continues to move lower, both RSI holding over 40 so far, and the MACD staying positive, keeps it in the bullish zone. Waning in the bullish zone. A close higher Wednesday would confirm the reversal candle, and likely turn the momentum indicators. It just may be time to put your SOX on.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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