Chip Stocks: The Selloff Isn't Over
45sDirectly addresses a hot topic with a contrarian view, sparking curiosity and debate among investors.
▶ Play ClipAI Summary
The video analyzes the recent selloff in semiconductor and memory chip stocks, arguing that the decline is not yet over. The speaker examines several ETFs and individual stocks, identifying key technical patterns and levels that suggest further downside before a potential bottom is reached.
Chapters
[00:15]
South Korea ETF (EWY) Shows a Clean Top
The EWY ETF peaked in mid-June and has since formed a clean top. After a strong open on Friday, it stalled at the base of this top, suggesting a retracement that will likely resume and break below Wednesday's low within the next week or two.
[01:10]
Leveraged ETF (Direxion Daily MSCI South Korea Bull 3X) Confirms the Trend
The triple-leveraged version of the same market has a history of topping and dropping sharply. It fell from 56 to the teens, losing 70-80% of its value in a short span, confirming the severity of the selloff.
[01:50]
Individual Stocks Are in Dangerous Ranges
Applied Materials, Intel, Nokia, and STMicroelectronics are all in wide, dangerous ranges. Intel is between two gaps, Nokia collapsed from 18 to nearly half that, and STMicroelectronics reversed a huge ascent by nearly half. These are not opportunity-rich environments for either longs or shorts.
[03:04]
SMH (Semiconductor ETF) Shows a Diamond Top
The SMH ETF broke out of a clean channel, formed a diamond top pattern, and broke down on July 16. After a retracement to the pattern's bottom, it tumbled hard. The speaker expects no true bottom until the lower channel trendline is tagged, which will be below Wednesday's lows.
[04:01]
Next Major Catalyst: Nvidia Earnings
The next significant scheduled event for semiconductors is Nvidia's earnings report, due after the close on August 26th. While geopolitical and economic news will occur in the interim, this is the key date for the sector.
[04:15]
SOX Index Is the Key Indicator
The SOX index, the basis for the SMH, is the key for medium- and long-term perspective. It shows a clean top with a well-defined resistance area. If selling resumes, watch for a tag of the lower trendline in the channel.
The semiconductor selloff is likely not over. The speaker expects further downside until the lower channel trendline is tested, with Nvidia's earnings on August 26th as the next major catalyst.
Mentioned in this Video
Study Flashcards (5)
What ETF is used as a proxy for South Korean semiconductor stocks?
easy
Click to reveal answer
What ETF is used as a proxy for South Korean semiconductor stocks?
easy
Click to reveal answer
EWY
00:15
What percentage of value did the leveraged South Korea ETF lose?
medium
Click to reveal answer
What percentage of value did the leveraged South Korea ETF lose?
medium
Click to reveal answer
70-80%
01:38
What pattern did the speaker identify on the SMH chart?
medium
Click to reveal answer
What pattern did the speaker identify on the SMH chart?
medium
Click to reveal answer
A diamond top pattern
03:04
When is Nvidia's next earnings report scheduled?
easy
Click to reveal answer
When is Nvidia's next earnings report scheduled?
easy
Click to reveal answer
After the close on August 26th
04:01
What is the basis for the SMH ETF?
medium
Click to reveal answer
What is the basis for the SMH ETF?
medium
Click to reveal answer
The SOX index
04:27
💡 Key Takeaways
🔧
EWY Clean Top
Identifies a clear technical pattern that suggests further downside.
00:15
📊
Leveraged ETF Loss
Quantifies the severity of the selloff with a specific percentage loss.
01:38
🔧
SMH Diamond Top
Highlights a specific chart pattern that signals a potential reversal.
03:04
📊
Nvidia Earnings Catalyst
Points to a specific upcoming event that could drive the next major move.
04:01Full Transcript
[00:01] at, uh, semiconductors and memory chip stocks in a very broad sense with this exceptionally dynamic market, to say the least. Um, not a lot of charts here, just some general points to make, so
[00:15] let's just dive in. Uh, we're going to start here with South Korea, EWW. And this has been an important ETF when looking at this because even though it's not exclusively, of course, about memory chips, uh, it is dominated by them and
[00:28] semiconductors. So, looking at the EWW, the peak of this was, uh, not that long ago, back in mid-June. And since then, we have hammered out a
[00:40] pretty clean top. And as I'm recording this on Friday, we opened very strong, but basically opened and peaked near this level, which is the base of this top as a whole. So, my view on this is that, uh, this is a
[00:55] simple retracement we've seen, principally on Thursday, and, uh, with Friday's morning strength dissipating as of now. My speculation is that in the next week or two, we will resume that drop and cut through the low
[01:10] we saw on Wednesday. And you can see this in exaggerated format with the which is the, uh, triple leveraged instrument based on, um, roughly the same market. And as you can
[01:24] see here, this has a long proud history of topping and dropping here, here, here, and most recently here. Um, it has been a tremendous fall lately because this is leveraged. So, this went from 56 and change all the way down to the
[01:38] teens. So, it lost a tremendous 70 to 80% of its value in a very short span of time. Uh, and things are still really badly sold off in a lot of cases as you
[01:50] Um, this is not exactly an opportunity-rich environment. We have, for example, uh, Applied Materials. And by opportunity rich, I mean neither well-positioned long or short at these price levels.
[02:03] Sort of in the middle of a wide, wide range. Intel, INTC. So, for example, we up here, this gap, and the next meaningful support is down this gap. It's in the middle of this absolutely staggering range. Very dangerous.
[02:19] Um and then Nokia, you can see that this has just collapsed with uh tremendous uh has just collapsed with uh tremendous uh speed down from almost 18 to nearly half that level in just a matter of weeks. And just another example, uh
[02:33] STMicroelectronics, once again, we see a situation in which the ascent was exceptionally rapid and huge on a percentage basis. Um moving up hundreds and hundreds of percent. And just as quickly it's reversed course
[02:48] time um by nearly half. Uh but my point is that uh it's really the bigger picture with the likes, for example, of SMH that I think need to be the North Star for us here. Um SMH was in this clean, smooth
[03:04] channel for many, many months. It was so strong, it actually got above this channel. And my perception is that we formed a diamond top pattern here, which I've highlighted with this oval. And we were grinding around within that,
[03:17] finally broke it here on the 16th of July, fell for a day, pushed higher for a couple of days, and kissed the bottom of that pattern for a couple of bars here, and then we got a real nice hard tumble, which uh was the
[03:32] crescendo on Wednesday at the close, and then our retrace back to um this resistance area. So, I don't think there's going to be any true bottom for this in the medium term until we tag the bottom of this channel, which
[03:47] will be lower than the lows we saw on Wednesday. And just to wrap up here, the next meaningful scheduled event is almost a full month away, which is the Nvidia earnings report. Now, of course, there's
[04:01] tons of geopolitical and economic news that'll take place between now and then, but in terms of a specific and huge semiconductor maker, this is Wednesday after the close on August 26th.
[04:15] It's not an especially clean pattern now. It's a dainty little top here, but this has been fake this has been fake outs before. Like this was a much better top, and it never completed. They just pushed to lifetime highs.
[04:27] pushed to lifetime highs. But as with the SMH, the SOX, which is But as with the SMH, the SOX, which is the basis for the SMH, is the key here. From a medium-term and long-term perspective, and once again, it seems to
[04:39] me that the selling is not over. Uh we have a very clean top here with a very well-defined area of resistance. And should we resume selling hard, what to watch for is a tag of that lower trend line in the channel.
