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Stocks

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After Nvidia (NVDA) dropped after earnings this week, investors are once again reminded of the importance of the semiconductor space. I think of semis as a “bellwether” group, as strength in the VanEck Vectors Semiconductor ETF (SMH) usually means the broader equity space is doing quite well. Today, we’ll look at a potential topping pattern forming for the SMH, what levels would confirm a top for semiconductors, and what weakness in this key group could imply for our equity benchmarks. Presenting the Dreaded Head-and-Shoulders Top Pattern Ralph Edwards and John Magee, in their classic text Technical Analysis of Stock Trends, laid out the analytical process for defining a head-and-shoulders top. I’ve found that any price pattern like this consists of three important phases. First, we have the “Setup” phase, where the price action begins to take on the appearance of a certain phase. This is when your brain tells you, “This is definitely a…