SMH - A perfect illustration of a shooting star candlestick on its weekly timeframe
The Semiconductor ETF $VanEck Semiconductor ETF(SMH)$ provides a perfect illustration of a shooting star candlestick on its weekly timeframe. The black arrows in the chart highlight this formation, which historically preceded declines towards the 20 or 40-week moving averages, and even deeper corrections, as witnessed in April. The overbought oscillator further reinforces the potential for a pullback.
The volume shelf, originating from $231.2, is expected to provide substantial support. Any support level situated within this green volume-at-price shelf is inherently stronger than those outside it, whether above or below.
On Friday, June 6th, I published the support and resistance levels for the week ahead including SMH in over 40 securities. In that analysis, $249 was identified as the level dictating bullish momentum if the price remained above it. The bullish targets, or layers, were set at $259.5, which caused a temporary rejection on Monday, and $266.3, which indeed acted as a firm ceiling for semiconductors. Consequently, the price retraced from that zone, printing a weekly bearish candle.
The levels for next week were updated on Friday again. For access, click here: Key Levels to Manage Turbulence.
The price closed on Friday at $257, as highlighted with the black background on the right price scale in the chart below. This closing price is below the central weekly level for next week, which is $259 (bold and underlined). Therefore, if the price remains below this level, the shooting star formation gains further validation, and the next immediate target would be $253. While $255 might offer some monthly support, its proximity to Friday's closing price is notable. Moreover, this weekly formation typically precedes deeper corrections, as indicated by the red-transparent arrows in the chart.
If SMH successfully recovers its $259 key level (as some shooting stars serve as early warnings followed by a final spike before the actual pullback), $262 becomes the next resistance zone or target to assess for a potential bearish reversal.
In general, the Semiconductor ETF has been presenting a series of lower highs since July 2024, when some semiconductors stocks peaked ( $Micron Technology(MU)$ $Advanced Micro Devices(AMD)$), and others set a notable high that has been slightly surpassed before falling again for a consolidation ( $NVIDIA(NVDA)$ $Texas Instruments(TXN)$). Only $Broadcom(AVGO)$ is setting fresh all time highs but also with a shooting star.
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