The VanEck Vectors Semiconductor ETF (NYSEArca: SMH) traded slightly lower last week and entered Monday clinging to a modest year-to-date gain. Some technical analysts see some challenges ahead for the once hot semiconductor group.

Investors could be paying up for future catalysts for semiconductor and broader technology names. If there is a silver lining for the rising valuations on chip stocks it is that some industry observers believe the group’s valuations should not be measured in the traditional sense because of the evolution of the semiconductor business.

“The near vertical rally over the past couple of years saw SMH  test the 2000 highs in January & February, where a monster bearish reversal pattern took place last month, as it was attempting a breakout,” reports ETF Daily News.

What’s Next For SMH

SMH currently resides more than 15% below its 52-week high and about 2% below its 200-day moving average, indicating some near-term technical weakness could be in the offing.

“As the month is nearing an end, SMH has been soft in April and it is testing steep 2-year rising support,” according to ETF Daily News. “Support is support until broken and SMH is testing a very important support line this month, following a monster reversal pattern last month. What SMH does at support should send an important message to this leader and the broad markets going forward.”