For those of you who don't know The Analyst Bomber, he once had a coveted spot writing for another publication. He is the most accurate fundamental analyst that I know of and while you may think I am biased because I am married to him, I assure you that his views should not to be taken lightly. While I have some experience with fundamental analysis, he is my in house fundy analyst and I am fortunate to have him.
I trade technicals for the most part. I believe that technical analysis lends better odds to those of us retail traders swing trading our portfolio but when Robert (AB) has fundamental ideas that match up with my technicals, those are often the strongest trades and that combination allows for even better odds. But as I have mentioned many times, fundamental analysis tends to be emotional as the very structure of it causes the analyst to say what "should happen" and makes it difficult for him to accept what "IS" happening. For those who don't know, fundamental analysis determines the value of a company while technical analysis charts the price of the stock for probable direction without concern for actual valuation. In this sense, fundies are better left for long term investors rather than swing traders since a good fundy analyst will likely see price go to its value eventually but not before some volatility. Charts, on the other hand, tell us what is now.
For this reason, Robert and I decided some time ago that I should manage all our accounts going forward. I use his fundamental views as an influence to my technical views and trade according to my strategy with discipline. Like any money manager, I enjoy a good valuation point of view and I am grateful to have such a great analyst on my team...and cheap too!
Recently we have been talking about the SOX or the Philadelphia Semiconductor Index and without further ado, here is my technical analysis of the SOX By Special Request from The Analyst Bomber.
SOX-X daily chart shows a pull back and currently the secondary trend or shorter term trend is down. The daily chart follows but be sure to keep scrolling down for the longer term charts and analysis.
When I zoom out to look at the weekly chart, I note that the index broke out of its 2014 level of resistance. It knocked at that door several times and eventually it opened in November. The index went higher for a couple of weeks before rolling over. It is now approaching that breakout level and the 8 week ema (my trigger line). Previous resistance often becomes support and as often as that resistance was rejected, I suspect it can deliver a strong level of support. Here is that chart, but again, be sure to scroll down for the big picture.
Then I zoomed out to look at the multi-year trend on the weekly chart and I note that a multi-year breakout took place in February of 2014 before it created the recent resistance level that it broke out of in November. There is no question when looking at the longer term chart that the primary trend of the index is up and as long as recent resistance/support confirms with an inflection, I will be a buyer of SOX components into the new year. But I also note that as a technical analyst, I reserve the right to be wrong and I have no issue with that. I do not state what should happen or what will happen but only what is probable based on the charts. If that resistance / support level is lost, I will be keeping Stox in SOX at bay. Here is the Primary Trend chart.