The current rebound in the Philadelphia Stock Exchange Semiconductor Index (SOX) is bumping against a key resistance and a failure to breakout could see more damage in the near and longer term.
On a LT basis, SOX is currently testing the underside of the previous uptrend channel support (now resistance).
Failure to break above this resistance would be negative for the index. A break of the LT support at 355-360 would signal that the index is heading into a multi-year correction.
For the near term, prices are testing the resistance of its ST downtrend channel from the 686 swing high.
As long as prices stay below 677, the index is vulnerable to a swift move to the downside.
Falling below 633 would boost the idea that the next leg down is underway.
Anything below 573 would likely confirm that SOX is heading to below 543 next, which also confirms the multi-year correction.
We would only turn bullish on the index in the ST on a break above 706, the 79%FR levels on a closing basis. Lower for now. (Read Report)
Source : CIMB Research