Here is my take on the semiconductor sector, along with $SMCI and $NVDA – February 20, 2024
This is Dan Fitzpatrick with FITZ IN FIVE. Let’s look at the semis today, and you will see why in a moment.
The Semiconductor Index ( NASDAQ: SMH ), generally speaking, semiconductors are pretty strong. We’re looking at the actual index or we look at the ETF, which is essentially the same thing, only you can trade it. This is in a nice uptrend, uptrending the 200-day, the 50-day, and the 20-day.
The 8-day just turned down a teeny tiny bit because of today, so we don’t really care about that yet, and then the price is also moving up. Nobody can quibble with this trend, it’s strong, and really nice here. The weekly chart shows a really, really nice trend. I like this, it seems to me like it’s going to go higher. However, right now we need a bit of a rest.
Let’s look at this, from the 200 up to the very top here, it was 31, 32 percent. The price ultimately got 32 percent above the 200-day moving average before peaking a little bit. Now, this is an ETF so you’re not really going to expect anything super dramatic here. Back here it was up about 32 percent from the high. Right here, maybe a little bit less; 33 percent, here, 35 percent.
So you get it, low to mid-30s as far as the excursion away from the 200-day moving average. This is important, and this is why, we look at NVIDIA ( NASDAQ: NVDA ) back here at the high. This was up 92 percent, which again, NVIDIA ( NASDAQ: NVDA ) has been a monster stock, you can’t compare this with Semiconductor ETF ( NASDAQ: SMH ), they’re totally different. That’s an average, this is the best, so that’s 92.
I’m just trying to eyeball and find the greatest distance between whatever the price is and here it’s 112 percent, right now 60 percent. So if we are looking at these metrics, this is not at an extreme high relative to the long-term moving average, which is the 200-day. The weekly chart really looks the same.
It looks fine, though, I’ve talked about this enough times to where anybody who has followed me understands this terminology. I see this little fish hook here on the lower Bollinger Band, the Bollinger Band opposite the move. What this indicates, you can see it here on the price, it just confirms it, what it indicates is that this trend, at least for the time being, is over.
It doesn’t mean that we are going to get a big reversal, it just means that according to standard deviation, this trend has run its course, and so we can expect more of a pullback. What I’m looking at here is, that I don’t know how NVIDIA ( NASDAQ: NVDA ) is going to trade after hours but my bet is this, if the stock gaps up and opens up really high on Thursday, I have a hard time thinking it’s going to hold that level.
It might be because we did see that with Meta ( NASDAQ: META ) here, but Meta ( NASDAQ: META ) is not NVIDIA ( NASDAQ: NVDA ). That’s what I’m looking at here, even if the stock really, really moves up a lot, the question is, are you going to be selling it or are you going to be buying it? I would absolutely say you don’t want to be buying it.
Whether you sell it depends on your idea as far as what you trade is going to be. Now, if we look at SMCI ( NASDAQ: SMCI ), this is a different thing altogether. We look here, SMCI ( NASDAQ: SMCI ), at one point last week, was 255 percent above its 200-day moving average. That’s kind of like Mars; it was 170 percent here at the top.
I got some emails and a couple of comments from people, not that many, but some from people who disagreed with my assessment last week that the SMCI ( NASDAQ: SMCI ) trade is over. You’ve got to give it up and move on. And a couple of people are saying, no, no, no, it’s going to move higher on Tuesday.
There is a bid and any ask to every trade, people take either side of a trade. But the way this is trading, if you just look at it within this one metric, which is the relationship with the 200-day moving average, you can’t expect this thing to just keep giving, and giving, and giving. It’s got to pull back just as a function of sell the news, take the money, and run.
So when I look at the way SMCI ( NASDAQ: SMCI ) is trading, I can’t help but make some kind of comparison to the way NVIDIA ( NASDAQ: NVDA ) is trading. I’ve explained to you the differences, and why they’re different, but some things are the same. I’m not going to say the move is overdone.
I told Charles Payne months ago that I really felt like the accurate price target on this thing would be $1,000.00, and I still believe that. But I said that it would take several quarters to get there, and I still believe that too. I’m bullish on NVIDIA ( NASDAQ: NVDA ), don’t think I’m fading this thing and saying, Oh the company’s overdone, the move is done. No, not at all.
I’m saying, as a trade, you take this volatility pop here, and you get a nice little 45 or 50 percent run. You take that money and then wait for a better entry, and sell some of your position. For crying out loud, you don’t have to sell it all if you don’t want to. You could, it’s your trade, not mine. But the bottom line is, that you take profits, at least some profits on a stock that goes way above what you think it should normally go.
That’s my sense with this. I’ve just shown you the semis, I’ve shown you SMCI ( NASDAQ: SMCI ). With NVIDIA ( NASDAQ: NVDA ) I say, if the stock pops tomorrow after hours, you’ll probably want to book some profits and get out of there, at least for the time being.
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