Shares of the VanEck Vectors Semiconductor ETF (SMH) surged Friday, only to stage a hard sell and close near their lows. The surge was a new all-time high on the ETF but the reversal put in an ominous sign. By closing in the lower 25% of the candle for the day, the semiconductor ETF put in a topping tail. Topping tails are notorious reversal signals, often signs of a long term top. Did the semiconductor ETF just put in a major top? The way you tell is simple. The high pivot of $141.93 from Friday needs to hold on a daily closing basis. As long as no daily close is above that level, investors and stock traders should assume a major top is in place. Today, the semi’s have move higher but have not even violated that high intra-day. Keep watch of the close today and every day going forward. As a trader and investor, the Semiconductor ETF (SMH) can be shorted here with a stop on any daily close above $141.93. The beauty of this trade is the stop is super tiny (low risk). If it does become a long-term top, there is massive downside. Cheers and enjoy this great trade setup.
Related stocks to watch are Micron Technology, Inc. (MU), Western Digital Corporation (WDC), Broadcom Inc. (AVGO), Intel Corporation (INTC), NXP Semiconductors N.V. (NXPI), Taiwan Semiconductor Manufacturing Company Limited (TSM). If the semiconductor ETF tops, every semiconductor stock becomes a short as well. Watch that key level for the trade to either be on or off.
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