Chips Break Down and Banks Break Out
The second half of 2024 has begun, and some new trends may be emerging.
Today’s idea compares the daily chart of the Philadelphia Semiconductor Index and the weekly chart of the KWB Banking Index.
BKX
The first pattern on SOX is the price action on July 10-11. A move to new record highs was followed by a bearish outside day. That false breakout may signal a reversal.
The chip index next gapped lower and ended last week below its low from mid-June. Did a series of higher highs and higher lows end?
Third, MACD was falling during the latest attempt at new highs. That “bearish divergence” is another potential reversal pattern.
Finally, SOX crossed below the 21-day exponential moving average.
Together, these signals may suggest that sellers are finally gaining an advantage over buyers in chip stocks.
BKX, on the other hand, made new 52-week highs as SOX broke down.
Notice the higher weekly lows and rally above its May peak. The index has now erased all its losses during the collapse of Silicon Valley Bank in March 2023.
These patterns could be especially meaningful given bigger changes with the Federal Reserve expected to cut interest rates. Recent quarterly reports have also suggested that bank lending has started to improve. There could also be more political risk facing chips into the U.S. Presidential election on November 5.
Traders may want to heed these potential changes in case these patterns evolve into new trends into yearend.
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Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit [url =tradestation.com/DisclosureTSCompanies] TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
Today’s idea compares the daily chart of the Philadelphia Semiconductor Index and the weekly chart of the KWB Banking Index.
BKX The first pattern on SOX is the price action on July 10-11. A move to new record highs was followed by a bearish outside day. That false breakout may signal a reversal.
The chip index next gapped lower and ended last week below its low from mid-June. Did a series of higher highs and higher lows end?
Third, MACD was falling during the latest attempt at new highs. That “bearish divergence” is another potential reversal pattern.
Finally, SOX crossed below the 21-day exponential moving average.
Together, these signals may suggest that sellers are finally gaining an advantage over buyers in chip stocks.
BKX, on the other hand, made new 52-week highs as SOX broke down.
Notice the higher weekly lows and rally above its May peak. The index has now erased all its losses during the collapse of Silicon Valley Bank in March 2023.
These patterns could be especially meaningful given bigger changes with the Federal Reserve expected to cut interest rates. Recent quarterly reports have also suggested that bank lending has started to improve. There could also be more political risk facing chips into the U.S. Presidential election on November 5.
Traders may want to heed these potential changes in case these patterns evolve into new trends into yearend.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options and futures. See our Overview for more.
Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit [url =tradestation.com/DisclosureTSCompanies] TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
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