Last week I did a piece on the Semiconductor stocks, mainly the top holders in the ETF- “SMH”. I highlighted the top performers in the SMH with their weighed holding from the top down. See Semiconductor: http://wp.me/p2oNy1-2m.
ARMH stuck out like a sore thumb. Rightly so due to strong earnings, a .48% dividend yield, and as a top tablet play has finally taken this UK based stock to new highs.
So let’s look at what be in store for ARMH as it has climbed towards 40 dollars. On 10/23, ARMH gapped up to $30 and in 23 sessions moved with little resistance to top the tape at 37.41 on 11/28 and today, almost 7.5 points higher. The breakout on the gap plus the test and break of the May 2011 highs at 32.18 was broken in one week with huge range expansion up. Obviously a powerful move with portfolio buying daily. So what’s in store for ARMH? My thoughts are this. The move is extreme and technically the charts are super strong. But I see some divergence in the RSI that started at the beginning of November. One month later, we have higher prices with lower RSI reading creating a diverging RSI indicator. So this is a great spot to digest the move and if you’re long, possibly take some profits or protect from an aggressive pull back to test 35. Short sellers, in a strong trend like, this can get smashed. But as the RSI shows divergence, the short sale is in play and needs to be put on with small size due to the contra–trend technique. Look for a few aggressive selling days to buy back their short and book some profits as it can get aggressively sold towards 35. 35.17 on the chart marks the 20 ma.
Some key things to look at on this chart:
- The strong gap with continuation of the trend with little rest or pullback.
- The RSI absorbs the rest phases (which is normal) but fails to produce higher or even matched high RSI reading as price makes new highs daily. See white clouds on price and rsi.
- The past three sessions are choppy with larger than normal ranges and declining RSI levels. This can mean a temporary top.
- The ETF-SMH holds approximately 6% of ARMH.
Disclaimer: The material provided is purely for educational purposes only. No information contained herein is a solicitation or offer to buy or sell any securities. The information provided is in no way investment advice from Nick Pirraglia, TradersThinkTank or any other contributed content. The opinions, analysis and commentary on this website are purely the subjective views of the author. Nick Pirraglia is not a Registered Investment Advisor and under no circumstances should any content from this site be used as investment advice, recommendations, or trading advice. Please consult your financial advisor prior to making investment decisions.