The October market decline started with the Semi’s (well, after the Small Caps, which had been diverging for months) and the bounce back has been furious.  So now it is decision time for traders who would participate in this area.

The bounce filled the over hyped downside gap and brought SOX back up to the 50 day moving average and a visual resistance zone.  If it is going to stop (i.e. resume its correction) it should do so within or below the noted resistance zone.

Note how many times (by the arrows) that zone has been short-term support or resistance.  A short on the Semi’s (on SMH or with one of the inverse ETFs) could be placed at the equivalent of the SMA 50 on the SOX, with a stop loss above the top line.  Remember, limiting losses is more important than trying to make gains.  Always.

RSI is above 50, but MACD is still below zero and interestingly, despite the bounce AROON says “daily downtrend still in force”.


Sell Short:  As close to the MA 50 and the resistance zone as possible

Downside Target:  At least a test of the October low

Stop Loss:  Above the resistance zone to suit risk tolerance, but please consider keeping stops tight.  There is always another day.

Note:  Thanks to BoJ, trade busted before it could even get started.

A reminder that NFTRH+ updates are just trade setup ideas, which may not be revisited as the parameters are already noted.  They are meant as a starting point for further research if interested.