By Doug Busch
The Nasdaq Composite is slipping toward correction territory, and semiconductor stocks are once again leading the decline. Momentum has turned negative, positioning remains crowded, and volatility is creeping higher. History suggests the selling may not fully exhaust itself until investors see signs of capitulation, or a clear technical catalyst that restores confidence.
With the year not yet halfway complete, fourteen large-cap semiconductor stocks have more than doubled, underscoring the power of the AI-driven rally. The gains have been especially dramatic in memory names, with SanDisk up roughly 600% and Micron Technology advancing 200%.
Yet momentum has cooled. Coming into Thursday's session, SanDisk and Micron were trading 5% and 16%, respectively, below their recent all-time highs.
The pullback raises a familiar question. Is the bubble bursting, or is this simply a healthy consolidation after outsized gains?
Some of the best investors have argued that bubbles aren't to be feared, but navigated. George Soros famously argued that investors shouldn't automatically avoid bubbles. Instead, he believed they should participate while the trend remains intact and exit when the underlying narrative begins to break down.
That negative thesis may already be starting to take hold. No one rings a bell at the top, and seasoned traders know better than to try to pick the exact peak.
Given this backdrop, examining the daily charts of the Nasdaq Composite and the VanEck Semiconductor ETF may offer clues about whether this is a routine pullback, or the start of something deeper.
Looking at the daily chart of the Nasdaq Composite, the index has closed lower in five of the past six sessions, and Thursday's early rally quickly faded. A doji near the 27,000 level on May 29 marked a potential near-term inflection point, and price is now testing its 50-day simple moving average.
Volatility has picked up meaningfully, often a feature of late-stage advances. After a period of tight consolidation, intraday ranges expanded sharply, moving roughly 1,000 points on June 5 and 1,300 points on June 9. Volume has also increased since the start of June, reinforcing concerns that distribution may be underway.
Momentum has deteriorated quickly. The RSI has fallen from above the overbought 70 level into the 30s in short order. This abrupt shift suggests downside velocity is accelerating.
From here, a retest of the April 15 breakout area near 24,000 appears possible, implying 5% downside from current levels.
The Nasdaq Composite was trading around 25,800 Thursday.
Looking at the daily chart of the VanEck Semiconductor ETF, a bearish evening star was completed on June 4 following a powerful 79% advance since the start of the second quarter.
The reversal signal gained credibility after a sharp 9.2% decline on June 5, which occurred on the heaviest daily volume in roughly 14 months. A doji candle on June 8 further underscored investor indecision.
Technically, the fund remains vulnerable. The ETF remains well above its 200-day simple moving average, and the 21-day exponential moving average has begun to curl lower.
Last week also produced a bearish shooting star on the weekly chart, at all-time highs, reinforcing the idea that upside momentum may be stalling.
The setup suggests additional downside. A pullback into the $545-to-$550 range over the coming weeks -- 12% below current levels -- would represent a more attractive area to reassess and potentially re-enter on the long side.
Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 11, 2026 16:07 ET (20:07 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments