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Staying Power

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The short-covering rally triggered by last night's "not as bad as expected" INTC update has proven to have staying power, with the SOX.X holding near the best levels of the day. However, the bears are fighting hard to maintain short-term resistance near 292. A break over this level could clear the way for a move to the next shelf of resistance in the 309-310 region.

Chart of SOX.X - 30 minute interval:

Moving out to a daily chart of the index, bulls can be heartened by the daily stochastics (5,3,3 setting), which are starting to emerge from the oversold region. Point-and-figure chartists will also notice that the SOX.X has reversed into a column of "X's."

Of course, the rhetorical $25,000 question is whether today's rally will carry over into next week's trading. Those looking for signs of a near-term bottom in the chip group should be watching to see how the market reacts to further negative sector news. A failure to sell-off on bad news could be an indication that the recent downtrend has run its course.

Kent Barton
Option Investor

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