You can see on the daily chart of SMH, ETF for the laggard semiconductors, that a valiant attempt at a double bottom is being made by the bulls. In addition, as I noted on my market video recap yesterday, a hammer candlesticks was printed which seems to be confirming to the upside today. The bulls may very well have a case for a major bottom being put in place, especially INTC rallying on seemingly disappointing earnings yesterday.
However, one of the most overrated patterns in chart analysis is hastily identifying a double top or double bottom, particularly one in progress. Too often, these patterns fail miserably and just perpetrate the prior trend. In fact, most of the time we do not know that a double top or bottom has been confirmed until well after the fact, given the amount of ground the chart has to cover to even confirm.
Thus, a certain degree of humility is required. Although the 200 day moving average is slightly rising on the SMH, the 50 day continues to clearly downslope. You might very well ride the Intel “up on bad news” wave, but don’t go too far out from the shore just yet.
a bit of a teaser heading.. i expected more than a graph..;-)”
but a good point just the same..
Chess- As far as INTC is concerned since the analysts have been saying starting in May that INTC will miss the stock had declined about 18%. The report from INTC was better than expected since everything was priced in at this point. Furthermore, traders may have dumped but value investors tend to look longer term as you are purchasing future cash flow and INTC has quite a bright outlook past the Q3 slowdown. Sure revenues will grow 3-5% y/o/y vs higher single digits but it is trading at 10 pe reduced number of outstanding shares via buybacks and pays a healthy dividend with a low payout ratio. INTC has a very strong balance sheet and what the analysts fail to understand it INTC is not just a microprocessor company that dominates the market but is also rapidly moving in to other markets. After listening to the conference call it is obvious that normally conservative INTC guided down for Q3 but their forward looking statements seemed very positive for future growth an earnings which I believe is why the shares are being bought to day by value players who will get paid to wait at rates far in excess of a 10 year UST. My two cents