NOVELLUS PULLS SOX LOWER -- ALTERA, AMAT, AND INTEL ALSO WEAKEN -- SOX ON SHORT-TERM SELL SIGNAL
NOVELLUS BREAKS 200-DAY AVERAGE... Novellus is tumbling 11% today on very heavy volume. It's one of the Nasdaq's most active stocks. The daily chart shows the stock tumbling under its 200-day moving average. Not only had the stock already broken its 50-day average, but the 50-day line is now declining. Novellus isn't the only chip stock falling today. Some others are Altera, Applied Materials, and Intel. The action in those four stocks largely explains why the SOX Index is falling today. Chart 2 shows Altera gapping under its 50-day line today. Charts 3 and 4 show Applied Materials and Intel trading beneath falling 50-day lines.
Chart 1
Chart 2
Chart 3
Chart 4
SOX ON SHORT-TERM SELL SIGNAL... The Semiconductor (SOX) is still trading over its 50-day average. A close beneath that support line is needed to turn its trend lower. Short-term technical indications, however, have already turned down. The RSI is dropping from overbought territory. The daily MACD lines have turned negative for the first time since mid-November. The SOX/S&P 500 ratio line is also weakening after recently failing to reach a new high. That's reflective of some loss of confidence (and underperformance) by the chip group.
Chart 5
WEEKLY SOX TREND WEAKENS... The weekly SOX chart is also some cause for concern. The 14-week RSI line turned up from under 30 during the fourth quarter of 2002. Since then the RSI has risen in a continuing sequence of higher highs and higher lows. Until recently. After reaching overbought territory at 70, the weekly RSI line failed to confirm the recent move into new highs by the SOX Index. That's a potential negative divergence from an overbought condition. The weekly MACD lines also appear to be weakening. The bottom lines show the (black) ADX line rising since last spring. That's indicative of strong trending action. The ADX line has started to weaken, however, which is a sign that the recent trend is tiring. That suggests that the SOX could be entering a period of consolidation or correction. The green (+DI) line is still over the red (-DI) line which means that the major trend is still up. Other indicators, however, indicate that the uptrend is stalling.
Chart 6
