Conclusion, Investment Implications, Strategy
The VanEck Vectors Semiconductor ETF (SMH) is resuming its April 2020 Strategic advance amid coincident relative outperformance versus the S&P 500 (SPY), this following 4 months of sideways investor indecision. A sustained rise above the 255.24 area would confirm this and target an additional 14% rise to $297.00 per share. This is an Asbury Momentum trade idea.
Analysis and Rationale
The VanEck Vectors Semiconductor ETF (SMH) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Listed Semiconductor 25 Index (MVSMHTR), which is intended to track the overall performance of companies involved in semiconductor production and equipment.
The green highlights in the upper panel of Chart 1 below show that SMH is breaking out higher from 4 months of sideways investor indecision. This suggests that the April 2020 major uptrend, as defined by its 200-day moving average, is resuming. A sustained rise above the upper boundary of the investor indecision area at 255.24 would confirm this and target an additional 14% rise to 297.00.
The green highlights in the lower panel show that the blue daily relative performance line between SMH and the SPDR S&P 500 ETF (SPY) moved back above its 62-day moving average on Jun 24th, indicating a new quarterly (our Strategic time frame) trend of relative outperformance. SMH has already outperformed SPY by 10% since May 12th.
Table 1 below shows that considering the aforementioned upside target and a protective stop placed below the $244.96 area, a long entry price of $257.90 would provide a 1:3.0 risk/reward ratio (risking $1.00 to make $3.00) with an initial risk of 5.0%.
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