While the DJIA, the S&P 500, and the NASDAQ Composite are still sitting near highs, there is weakness showing up in some sectors that have recently been strong. Biotechs and Oil stocks are two good examples. But another sector that has been building strength, but is suddenly showing weakness, is the semiconductor-related group of stocks.
Intel, the highflyer of the group, remains at 10-year highs after beating earnings expectations two weeks ago. But most of the other top holdings of the Market Vectors Semiconductor ETF (SMH) are wilting.
In the above chart, I suggest that from the volume pattern, and the Stochastics, the current drop in SMH may have a ways to go. But the seasonal track record of SMH also supports the theory that semi stocks may be weak for several weeks more. Semi stocks are traditionally strong in the fall, but over the next 9 weeks, the SMH has averaged a 5.8% decline, with 5 of its 14 years sporting 5% or more losses. In contrast, only 2 of the 5 gaining years were on 5% or more gains.
A track record like this strongly suggests institutions regularly step back (pare positions) from semi stocks this time of year. If you are looking to stack the odds in your favor on every trade you make, you may want to avoid semiconductor stocks for the near future.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2014 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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