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Semiconductors trying to keep the rally alive

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The Semiconductor Index (SOX.X) is off its highs, but still the sector of the day, up 2.58%

Semiconductor Index Daily Chart

After forming an evening star candlestick pattern, the SOX performed as expected, as prices pulled back to the 38.2% retracement bracket at 604. Prices are trying to move higher, but the high of the previous five days congestion has yet to be broken. The channel that held prices down for so long is now looks like it wants to support any declines. You may find this hard to believe, but the MACD looks bearish. It's still just a warning flag and not a sure fire sell signal, because if you look at the MACD action between January and March of 2000, you get an idea of how overbought this oscillator can go.

Analog Devices Point and Figure Chart

While the Semiconductor Index has been consolidating, Analog Devices (NYSE:ADI) has been doing the same. A buy signal was triggered in early April, and gave us column of 12 Xs to calculate a bullish price objective of $68 (12 * 1 * 3 = 36, 36 + 32 = 68). The advance has broken the bearish resistance line, but has stalled between $46 and $50. If ADI trades $45, a sell signal would be issued, and prices could fall to the newly formed bullish support line at $40. If Analog gets above $50, we could be back on track to $68.

Jeffrey Canavan
Assistant Analyst
www.premiermarkets.com

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