After underperforming the broader market for much of the past year, things may be looking up for semiconductor stocks and exchange traded funds, with technical traders pointing to bullish chart patterns.
SMH rose 2.0% over the past week, compared to the 0.8% gain in the Nasdaq Composite and 0.4% rise in the S&P 500 over the same period. The tech ETF has been trading above its 50-day and 200-day moving averages, which recently formed a bullish “Golden Cross” as its short-term trend line crossed over its long-term trend.
While the sector has been outperforming in the short-term, SMH has largely fell behind major indices over the past year, gaining 8.4% compared to the 16.5% increase in the S&P 500. Ho pointed out that SMH is lagging behind 59% of the market.
North American manufacturers of semiconductor equipment had a book-to-bill ratio of 0.79 in November – readings below 1.00 tend to be bearish as it means that the demand has falling behind supply. However, the recent rally in semiconductors could mean that observers anticipate higher demand ahead.