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August 29, 2005
Semis Fail to Hold Breakout
Because of its importance to the Nasdaq, I regularly cover the Semiconductor HOLDRS (SMH). The stock formed a falling flag and found support around 36. There was even a breakout attempt last week that failed miserably as the stock closed below 36.5 on Wednesday. The stock went on to break the late April trendline and looks vulnerable to further weakness. The high at 37.15 is now the resistance level to beat. As long as this level holds, I stay bearish on SMH and this will weigh on the Nasdaq.
RTH led the market higher in May, June and July with an impressive 20% move. This could be the back-to-school rush into retail. The stock peaked in late July and gapped lower in August. A falling flag has taken shape over the last 4 weeks and I would remain bearish as long as the upper trendline and resistance at 99 hold. The stock is approaching support and getting oversold, but a reversal is out of the question as long as 99 holds.
Posted by Arthur B. Hill at August 29, 2005 07:23 AM