This Outperforming Industry Is on the Brink of a Pullback

Andrew’s Note: Last night, Jeff Clark unveiled one of the biggest investment opportunities of 2023…

He predicts we’re about to see a historic market “reset” on a scale we haven’t seen since March 9, 2009. And during this move, a little-known vehicle could double… triple… or even quadruple your money – if you’re willing to invest outside of banks and conventional markets.

In this special presentation, Jeff showed readers the exact steps needed to take advantage of this once-in-a-decade opportunity – including a free recommendation. If you missed the event, there’s still time to catch the replay right here.

Now, onto today’s Market Minute analysis by Imre Gams…

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The performance of the semiconductor industry has been one of my biggest surprises of the year so far.

Since January, the VanEck Semiconductor ETF (SMH) is up almost 30%. That’s an incredible move considering the Nasdaq is up around 20% on the year and the S&P 500 is up a little over 7%.

This relative outperformance has seen cash flood into stocks like Nvidia, Taiwan Semiconductor Manufacturing, and Advanced Micro Devices.

But now, I’m seeing signs that this big move is getting exhausted. The broader semiconductor space is starting to look vulnerable to a significant pullback.

Let’s take a look at SMH’s price chart to show you what I mean…

There are two important features going on…

First, notice the rising wedge pattern I’ve drawn using the blue trendlines. A rising wedge is a classic reversal pattern.

The key characteristic of a rising wedge is how both trendlines slope upwards. Eventually, these trendlines will cross one another.

If prices break out from the bottom of the wedge before the trendlines cross, then the wedge is complete. And once this pattern finally completes, we should see SMH trade significantly lower.

My downside target for this wedge is right around the $200 level, which is the base of the pattern.

Next, notice the bearish divergence (red line) in the Relative Strength Index (RSI).

Bearish divergence occurs when the price of a market goes steadily higher, but a momentum indicator (like the RSI) starts trending lower.

Whenever I track potential reversal patterns in the market, it’s very important for me to see bearish divergence… Because it’s a highly reliable sign that eventually, prices will follow the indicator.

In the case of SMH, the combination of the rising wedge and the RSI’s bearish signature shows we should be very cautious about the semiconductor industry.

Now is not the best time to play the short side on SMH. Instead, if the market does sell-off, the action could offer a great chance to buy the dip.

Over the coming weeks, I’ll be tracking SMH to notify you of any potential opportunities.

Happy trading,

Imre Gams
Analyst, Market Minute

In today’s mailbag, a Currency Trader member thanks Imre for his trading expertise and educational content…

Imre, wow! I am blown away by your trading expertise and ability to reduce the complicated to simple. How lucky your followers are, as nobody does this. I have been following Jeff Clark for years and your detail to the “how” and “why” enables me for the first time to really understand how to do, what to do, and why to do it.

I have never seen anybody explain any comprehensive subject like you do. I love it! I am so happy I signed up for a lifetime membership for your service and Jeff’s. I have other lifetime memberships of well-known services… but absolutely nothing compares to your explanations so that a simple layman is finally understanding.

I signed up recently and your issues date back to October 2022, so I am playing catch up. I have a trading view account and I’m paper trading with you in current recommendations. Meanwhile, I’m reading and listening to every update and video.

– David L.

Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].