Semiconductors Breaking Away Despite Bad Earnings
An attribute of BULL Markets is the ability to rally in the face of bad news. Usually, that means that bad news has already been taken into account and available sellers are exhausted.
Semiconductors have not only been reporting lower earnings but reducing estimates for 2019 and 2020. Despite poor fundamentals, Semiconductors are SURGING higher. The ramifications for the entire Nasdaq are HIGHLY BULLISH.
Nvidia, which had a sizable miss in the 3rd Quarter, is expected to report ANOTHER HUGE shortfall next week. On January 28th, NVDA disclosed that revenues would come in nearly 20% below forecasts. The company makes ultra-high performance chips used by gamers and Cryptocurrency miners. Demand for both has fallen precipitously.
Intel also missed earnings expectations and has guided lower.
The Philadelphia Semiconductor Index (SOX) is pictured in the Chart (of the day) above. Chipmakers are a KEY group among technology companies, and often a leading one. The index includes 30 components with a combined market capitalization of more than $1 Trillion.
Semiconductors are considered cyclical and very economically indicative. The completion of a ROUNDED Bottom for the entire index is also a VERY POSITIVE sign for the economy. SOX is close to making all time HIGHS.
Individual Issues Bottomed or Bottoming
Below is a Slide Show of several Key chip companies and the Semiconductor ETF (SMH). The patterns are very similar and very BULLISH. These powerful patterns in this VERY critical Sector indicate a growing likelihood of new highs in the NASDAQ as well. Some of the other issues with improving technical pictures were recently covered here: “Has The Bear Market Been Knocked Out?”. (https://markonomics101.com/2019/02/05/has-the-bear-market-been-knocked-out/).
Trade or Invest?
Chart patterns, such as the ROUNDED Bottom, can be reliable and often predictive as to short term to intermediate term moves. They can be an excellent tool to establish good entry and exit points for short term traders. Short term means less than 3 months typically, but the time frame will vary.
Potential players also need to be very aware that the market itself is highly overdue for a pull back of some kind. As of Wednesday close, the Dow Jones Industrials gained 16.5% and Nasdaq 100 18.5% in the last six weeks. The likelihood of further large gains by the indexes without some pause is small in the very near term.
It is also important to establish levels at which losses will be cut if a trade moves adversely. There is no rule as to exactly where entry, exit or stop loss should be. Much of that is individual choice and tolerance for risk or investment drawdown.
The market seems to be suggesting that despite lower near term earnings, companies can rally in the face of adversity. Bull Markets DO climb a “Wall of Worry”.
More and more opportunities are arising as additional companies turn their Charts positive. Situations recently featured include Gold (https://markonomics101.com/2019/01/26/gold-approaches-major-buy-zone-chart-of-the-day-12/) and the emerging Cannabis Industry (https://markonomics101.com/2019/01/21/are-pot-stocks-too-high-chart-of-the-day-11/).
Information is your best investment. That’s our job as your very own research department. Exciting times lay dead ahead with lots of opportunities.
Be Informed, Not Misled!