The Semiconductor Index (SOX.X) looks like it will test its lows sometime soon. The series of lower highs since late January has me believing that the 515 level should be tested soon. If the 515 level were violated to the downside, it wouldn't surprise me in the least to see this index trade another leg down and perhaps challenge some bearish price objectives from our point and figure charts in the 420 area. Any traders or investors that are currently long stocks in this group should be formulation action plans to hedge long positions on a break below 510.
Semiconductor Index Chart - $10 box
Both the 5-point and 10-point box/scales of the SOX.X indicate this index has the potential to reach the 420 level as it relates to the vertical count. The above chart is a 10-point box/scale chart to show traders the lower highs. Also notice how the above chart has seen this index violate its bearish resistance line to the upside several times, only to see the index reverse course and then achieve new lows. A break below the March lows (red 3) and a trade at 510 could be big trouble for those holding long. While the technicals don't look favorable for long-term investors at this point, traders can pocket nice gains with this indexes volatility. Current levels don't make for ideal shorting conditions as this index could easily rebound to the 600 level. We're scouring some charts to look for stocks that might benefit both up and down price swings and should have an up to date candidate list available soon.