The companies that operate within the semiconductor industry to provide the products that underlie a large part of modern-day convenience. Based on the graph models discussed below, it seems that bullish active traders are betting that the recent surge of momentum will continue. More specifically, the prices have recently risen above major resistance levels, which could be a signal that the long-term trend is headed higher from here.
SPDR S&P semiconductor ETF (XSD)
Traders often turn to popular exchange-traded products like the SPDR S&P semiconductor ETF (XSD) when they want to get an idea of where a niche market is headed. For those who are unaware, the XSD ETF provides targeted exposure to the semiconductor industry and consists of 35 holdings from across the united States.
As you can see on the chart below, the price has fallen below support of its 200-day moving average during the panic selling that has dominated March. The bounce from the lows has been strong enough for the price to return to the new resistance, and the recent price action suggests that the bulls are in control of the momentum again. Based on the model, active traders are likely to set price targets in the vicinity of the upper trend line at $115 and to protect their positions by placing a stop-loss order below $95.35 in the case of a sudden change in market sentiment.
Nvdia Corporation (NVDA)
The top of the holding of the XSD ETF, which is also the most well-known semi-conductors in the stock for the time being, is innovations of nvidia Corporation (NVDA). As you can see on the chart, the break above the 200-day moving average in August 2019 was a clear signal of the beginning of a major upward trend. In march sell-off sent the stock to the influential level of support, and the subsequent rebound led to a breakdown beyond the previous swing high, which is a sign that a lot of the trend, the operators use to mark the beginning of a movement on the rise.
Optimistic, the operators are likely to anticipate a continued increase in buying pressure. Traders will likely protect long positions by placing a stop below the horizontal trendline near $313.50, or combined support of the 200-day moving average and rising trend line near $226.98, depending on the risk tolerance and investment horizon.
Inphi Corporation (IPHI)
Another top holding of the XSD ETF that can capture the attention of the tendency of merchants is Inphi Corporation (IPHI). As you can see on the chart below, the price has been trading in an uptrend channel for most of the past year.
While the sell-off in March had many traders worried about the conviction of the bulls, the result of rebound and break above the ascending trend line has appeased the concerns and put the dynamic back in favor of the bulls. Bullish traders will likely expect the upward trend to continue and to place stop-loss below these levels of support in the event of a sudden change in momentum.
The Bottom Line
The semiconductor and technology stocks in general have reiterated their vital role in society today. Traders who are looking to gain exposure to the niche of the semiconductor industry may want to look closer at the XSD of the ETF and its top holdings, because many of the cards are pointing to higher prices from here.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.