He SMH ETF (VanEck Semiconductor ETF) It is an exchange-traded fund that seeks to replicate the performance of an index that measures the performance of companies in the semiconductor sector. These firms are involved in the design, manufacturing and marketing of semiconductors and related equipment.
He VanEck Semiconductor ETF (SMH) remains in the spotlight on Wednesday after falling more than 7% on Tuesday, posting its biggest daily percentage decline since March 2020 amid a sell-off in chip stocks. Thus, in this session the index marks a red of 0.6%.
It’s worth noting that the most heavily weighted stock in the fund is artificial intelligence (AI) star Nvidia (NVDA), which led the sell-off, falling nearly 10%, while other prominent chipmakers in the ETF’s portfolio, including Intel (INTC), Marvell Technology (MRVL) and Micron (MU), fell around 8%.
The chip sector has seen significant gains over the past year as widespread adoption of AI increases demand.Volatility in the group has increased in recent trading sessions after Nvidia reported earnings that beat Wall Street estimates but showed growth is slowing.
Recovery stalls at 50-day moving average
Since forming a double top in June and July, the fund’s price underwent a significant correction before staging a relief rally from the closely watched 200-day moving average (MA).
However, more recently, investors resumed selling on a correction towards the 50-day MA, with Tuesday’s drop occurring on the heaviest daily trading volume since early August, signaling conviction behind the move from larger market participants.
Looking ahead, investors should watch four key price levels on the ETF’s chart that could be crucial if weakness in the chip sector continues.
The first is located around $217, a level on the chart where the fund could find initial support near the March retracement low, which also currently aligns closely with the rising 200-day MA and a trading range located near last month’s low.
A break below this level could see the ETF price drop to the $200 zone, where it could find buying interest around the prominent lows of April and August. Last month’s low marks a technically important level, given the fund’s significant intraday reversal from this region on the chart.
The next price level to watch is at $176, a location where the ETF could draw support from the December high that formed at the beginning of the stock’s upward move from October to March.
A more prolonged correction could lead the ETF to visit lower supports around $161. This area could attract long-term investors looking for entry points near a range of comparable trading levels on the chart between July and December of last year.
Source: Ambito
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