In focus: tech sector and semiconductor charts In focus: tech sector and semiconductor charts In focus: tech sector and semiconductor charts

In focus: tech sector and semiconductor charts

Equities 2 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank Group

Summary:  The escalation of the China-US trade war has pushed the technology and semiconductor sectors lower, and investors need to be aware of support levels as well as headline risks.


On Monday, Saxo Head of Equity Strategy Peter Garnry published his outlook on the technology sector given the escalation of the China-US trade war.

Today, I'd like to take a look at the technical picture.

The SPDR Technology Select ETF (XLK:arcx) tracks the biggest tech companies in the S&P 500 index. The technical picture here looks quite similar to that of the Nasdaq 100 – no major surprise, as 35% of the ETF consists of Microsoft and Apple. Include Cisco, Oracle and Intel and the percentage rises to more than 45% 

Support for XLK seems to lie around $73. A close below that area will confirm a downtrend, likely triggering a sell-off down to test support at $69.

The Relative Strength Index is currently bearish with no divergence, i.e. there is potential to another push to test support at $73. 

A close above $76.50 is needed for the current bearish picture to be demolished. A close of the gap from yesterday could be the first warning that this resistance level could come under pressure. 
XLK:arcx daily
XLK:arcx (daily, source: Saxo Bank)
As an addition to Peter Garnry’s excellent article about the US-China trade war and its impact on the tech companies https://www.home.saxo/insights/content-hub/articles/2019/05/20/are-you-ready-for-a-cold-war-in-tech let’s have a technical look at the sectors mentioned. 

The semiconductors sector is a little more interesting, with the VanEck Semiconductor ETF (SMH:arcx) as our instrument of choice here (its largest holdings are: Intel, Taiwan Semi, QComm, Texas and Nvidia).

We saw a massive sell-off yesterday, with a huge gap down that totally ignored support at $104.60 to close almost directly on the 200 SMA, just a few dollars off the $99.40 support level.

The May downtrend has occurred under heavy volume compared to the uptrend from January to April – an indication of further selling pressure. 

We see RSI in oversold territory but no divergence, so further selling pressure could be expected. The $99.40 level seems crucial. 
VanEck Semiconductors ETF
SMH:arcx (source: Saxo Bank)

We can see how the semiconductor sector seems to “front run” the downtrend compared to the Nasdaq 100. This should come as no major surprise, as it is probably the sector being the hardest hit by the trade war. Back in April, semiconductors peaked about a week before the Nasdaq did.

Overall, markets are looking set to rebound today with futures up 06-0.7% into the New York bell.

Nasdaq 100 v. SMH semiconductor sector ETF (daily, source: Saxo Bank)
Nasdaq 100 v. SMH semiconductor sector ETF (daily, source: Saxo Bank)

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992