As Demand Soars, This Chart Just Burst Through a Key Level

[Trading With Larry Benedict]( As Demand Soars, This Chart Just Burst Through a Key Level Larry’s note: Welcome to Trading with Larry Benedict, the brand new free daily eletter, designed and written to help you make sense of today’s markets. I’m glad you can join us. My name is Larry Benedict. I’ve been trading the markets for over 30 years. I got my start in 1984, working in the Chicago Board Options Exchange. From there, I moved on to manage my own $800 million hedge fund, where I had 20 profitable years in a row. But these days, rather than just trading for billionaires, I spend a large part of my time helping regular investors make money from the markets. My goal with these essays is to give you insight on the most interesting areas of the market for traders right now. Let’s get right into it… By Larry Benedict, editor, Trading With Larry Benedict The global shortage of microchips and its impact on production lines is affecting everything from shipping smartphones to refrigerators during this holiday season. However, the auto sector is currently facing the biggest disruption. Both General Motors (GM) and Ford blamed the shortage for declining profits when they released Q3 results just a couple of weeks ago (compared to Q3 last year). However, it’s not only American auto makers that are feeling the impact... One-time GM subsidiary Opel announced last Friday that it would shutter one of its German plants for the remainder of the year, putting 2,000 jobs on hold. With only around 10-12% of microchips made in the U.S. – and the $52 billion package to improve the country’s microchip industry (and other technology) stuck in Congress – it’s hard to see how the shortage won’t run well into next year. So, to keep track of how the industry is doing, I use the VanEck Semiconductor ETF (SMH). When we looked at SMH on October 18 (red arrow on the chart below), it had just bounced off support, after testing it multiple times throughout October. This bounce off support coincided with increased momentum after the Relative Strength Index (RSI – lower blue line) formed a “V”… VanEck Semiconductor ETF (SMH) [Image] Source: eSignal This type of chart pattern can generate plenty of opportunities for mean reversion trades. As you can see, SMH has been steadily climbing throughout the year. The red line represents the long-term trend, and the two blue lines indicate the trading channel. (Remember: The upper blue line acts as resistance, with the lower blue line acting as support. 95% of SMH’s price history is contained within these two blue lines). Back then, we were looking for SMH to revert to the mean (red line). [How To Retire Rich Off a Single “Boring” Stock]( As you can see, not only did SMH revert to the mean, it continued to keep rallying. Strong momentum from the RSI saw it trade right up and through the resistance line of the channel. Right now, the RSI is indicating that SMH is overbought. So, how will it play out from here? The answer lies within the RSI… VanEck Semiconductor ETF (SMH) [Image] Source: eSignal We saw [yesterday]( that when a stock price rallies strongly, it can sometimes skew the RSI higher too. And, it can even take a day or so to iron itself out. Well, that’s what I’ll be watching for with the RSI over the next couple of days. With SMH bursting through resistance, I first want to check whether the RSI is giving a false signal (that’s when the RSI gives an overbought signal before buying momentum declines). The other thing I’ll be watching is the price action. We know that when a share price breaks through a support or resistance level and holds, then that level can change. And that resistance level can change into a support level if the share price breaks above that line and holds it. While it’s still early, that’s what I’ll be looking for with SMH. The first test is if it can hold above the upper blue line. If SMH is able to hold support at this level, then that could form the basis for another move higher. And that could mean SMH is transitioning from a slightly rising range-bound pattern into a new uptrend… That’s something that could provide us with a chance to go long. For now, though, we’ll have to wait and see. However, should this breakout hold, it could be very promising. Regards, Larry Benedict Editor, Trading With Larry Benedict P.S. We’re excited to hear what you think of your new eletter, Trading With Larry Benedict. Let us know at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [Is America splitting in two…?]( What do Elon Musk, Joe Rogan, and Ben Shapiro have in common? They all fled “Commiefornia”. And they’re not alone… In total, 8.9 million Americans have relocated since the beginning of the pandemic. Some believe America is splitting in two… [But this is just the tip of the iceberg.]( There’s a much larger exodus ripping through the financial markets… You won’t read headlines about it in the mainstream press… You won’t find it on Google search… And you won’t see it trending on Twitter either. It has to do with a shocking new technological trend taking America by storm. And it’s creating a new class of millionaires, unlike anything we’ve seen before... while everyone else is left behind. If you have any kind of money in the markets.… [Click here for more details before it’s too late.]( [image]( --------------------------------------------------------------- Get Instant Access Click to read these free reports and automatically sign up for daily research. [image]( [The Three Best Gold Coin Deals on the Market Today]( [image]( [The Gold Investor’s Guide]( [image]( [The Ultimate Guide to Taking Back Your Privacy]( [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2021 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](