Volume away from semiconductor ETFs’ (SMH), (SEMI), (NASDAQ:SOXX) overbought conditions could mean some long-term bullishness with other parts of the market seeing gains, according to an Argus Research Market Movers note.
Analyst Mark Arbeter wrote that funds have rotated away from the semis (SMH), (SEMI), (SOXX) and into other parts of the stock market “that either were in a slump or just weren’t going anywhere.”
The iShares Semiconductor ETF (SOXX) is up 27.52% year-to-date, but down 1.48% from five days ago.
In addition, over the past three days, the Information Technology sector ETF (XLK) has dropped 3.7%, and the Nasdaq 100 (QQQ) is down 2.2%.
“The main weakness has come from the previously scorching semiconductor stocks, with the iShares Semiconductor ETF (SOXX) dropping 6.4% in just three days,” said Arbeter. “Some unwinding of extreme overbought conditions generally is long-term bullish, as parabolic moves with no breaks generally end badly.”
Nvidia (NVDA) is down 13%, Qualcomm (QCOM) is down 12%, and Broadcom (AVGO) is also down 13% in just four days.
But sectors such as energy (XLE), financials (XLF), utilities (XLU), health care (XLV), real estate (XLRE), and industrials (XLI) have seen some gains over the past week.
According to the note, Argus’ recent picks are:
CrowdStrike Holdings (CRWD), Vertex Pharmaceuticals (VRTX), Amazon (AMZN), Xylem (XYL), International Flavors & Fragrances (IFF), KKR & Co. (KKR), Seagate Technology Holdings (STX), Quanta Services (PWR), Applied Materials (AMAT), Morgan Stanley (MS), Arthur J. Gallagher (AJG), Axon Enterprise (AXON), Moody’s Corp. (MCO), Leidos Holdings (LDOS), Alcoa Corp. (AA), KLA (KLAC), Hewlett Packard Enterprise (HPE), Chevron (CVX), Check Point Software Technologies (CHKP), Chubb (CB), Uber (UBER), Novo Nordisk (NVO), Dell Technologies (DELL), Pfizer (PFE), Booking Holdings (BKNG), and L3Harris Technologies (LHX).
