The Bears Tried to Sink Chipmakers, and Failed

Chip stocks have lagged along with the broader technology sector. But just when you think they’re dead, they have a session like yesterday.

Notice how the Philadelphia Semiconductor Index opened 2.2 percent below its close the previous session. Also notice how quickly it bounced and ended the session up a full 2 percent.

The low was lower than Tuesday’s and the high was higher: a textbook bullish engulfing candle.

In isolation, that’s interesting for the bulls. But there’s more because the weekly chart is trying to form a bullish inside candle with a higher low and a lower high. Following a drop like we’ve seen in the last month, that can signal a steadying in price before a change in direction:



Next, stochastics have shown an oversold condition all month (on the daily chart). It’s gradually lifting.

Finally consider the descending trendline that began on April 27. This creates the potential for a bullish breakout if the current range holds.

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