Now this: Blame Brexit for ensuing woes for technology stocks and exchange traded funds, including ETFs focusing on semiconductor stocks such as the VanEck Vectors Semiconductor ETF (NYSEArca: SMH).
Speculation that Great Britain’s decision to depart the European Union could weigh on technology stocks comes just a few weeks after chip stocks and ETFs started showing signs of leadership.
Last month, semiconductor stocks and ETFs surged after Applied Materials, the world’s largest supplier of tools used to make semiconductor chips, said it earned $0.34 per share on revenue of $2.45 billion, beating The Street by $0.02 per share and expectations of $2.43 billion in revenue, the Wall Street Pit reports.
“On the daily chart, we see that just last Thursday, the SMH ETF acted in a giddy manner and succeeded in making a daily breakout above its early-June highs. This was publicly celebrated on Twitter by chart-chasers and other momentum players, but by Friday morning, a much different tone had set in as the semiconductor ETF gapped lower. By day’s end, the SMH ETF closed the week at its very lows and also succeeded to break below the yellow 21-day simple moving average, which is often a first sign that a multi-week/multi-month change in direction is at hand,” according to InvestorPlace.[related_stories]
The semiconductor resurgence comes as investors have been departing technology stocks and exchange traded funds to start 2016. Slumping shares of Apple (NasdaqGS: AAPL) have been a drag on ETFs such as the Technology Select Sector SPDR (NYSEArca: XLK).
“On the multiyear weekly chart, we see that this semiconductor ETF managed in February to hold its 2009 support line, and in recent weeks it continued to show relative strength versus the broader U.S. stock market. As such, until the 2009 support line is broken, large institutional money will likely continue to be a buyer on dips in this space,” adds InvestorPlace.
ETF investors who are wary of continued weakness in the semiconductor space can turn to inverse or short semiconductor ETF options to hedge against a dip.
For instance, the ProShares UltraShort Semiconductors (NYSEArca: SSG) takes the -2x or -200% daily performance of the Dow Jones U.S. Semiconductors Index and the Direxion Daily Semiconductors Bear 3x Shares (NYSEArca: SOXS) provides a -3x or -300% performance of the PHLX Semiconductor Select Index.
For more news and strategy on the Technology market, visit our Technology category.
VanEck Vectors Semiconductor ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.