EarningsBeats.com Digest for May 14, 2021
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Sometimes It's About The Industry Group, Not The Stock
For many months, it was fairly easy to outperform the S&P 500. Just pick a semiconductor stock and hang on for the ride. Well, that's definitely changed and now the opposite is true. I wouldn't completely rule out this group rebounding and leading again, but their time for hanging onto support is running out. The group suffered a serious bout of selling in late February and into early March as growth stocks took a punch to the gut.
After rebounding in early April, the group has run into another snag, this one potentially more damaging technically:
The blue circles show us that the 20-day EMA didn't really prove to be major resistance after the last two selling episodes. The red arrow shows us that clearly sellers were lined up at that 20-day EMA test this time. Not good news at all. Furthermore, the red circle highlights the "death cross" where the 20-day EMA crosses beneath the 50-day SMA. The current alignment - price under 20-day EMA and 20-day EMA under 50-day SMA - is a
bearish one. We could certainly bounce to test that 20-day EMA at any time, but as long as this current alignment remains, a major price support test in the 5950-6050 range looms. Finally, note the RSI has definitively broken 40 support, which brings the uptrend into question, as does the horrendous breakdown in relative strength.
Given the further likelihood of more scary inflation headlines, I believe you need to proceed with much caution in semiconductors - and I haven't said that in a very long time.
Happy trading!
Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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