Options Trading News

November 18, 2011  Fri 12:20 PM CT

The Semiconductor HOLDRS exchange-traded fund has traded down to its 50-day moving average, an important uptrend support level, for the second day in a row.

The 50-day average, shown in orange on the daily chart below, is at $30.40 and not far from the current price of $30.55 this afternoon. If the SMH breaks below that level, it would be a negative not only for the  semiconductor names but also for the tech sector in general. As we saw in early October, chip stocks first led the way down and then the way back up.

Conversely, if the 50-day moving average holds as support through the day, it would be a positive. This would suggest that the bulls are ready to keep buying at this price level in both semis and the broader market.

Given the magnet effect of expiration, we will wait until Monday for the expiration overhang to dissipate before drawing too many conclusions.


(Chart data provided by Thomson Reuters)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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