Click to Enlarge Semiconductors are on a tear, up almost 7% during the past two days — with names like Texas Instruments (NYSE:TXN, +9.4%) and Micron (NASDAQ:MU, +8.5%) gaining big — and 19% since Dec. 20.
The chart dating back to 2009 reveals a big head-and-shoulders formation that, if it works out, would result in the PHLX Semiconductor Index (SOX) index being much lower.
In the meantime, however, the SOX is breaking out and higher today, above its 200-day moving average for the first time since July 2011 on volume.
Click to Enlarge While it is tempting to buy into this breakout, we will wait another day to see if it is for real. Given how far stocks have rallied off the Dec. 20 low, we still expect a pullback before ultimately having the possibility to head higher again in the medium term.
The semiconductors are a leading indicator, so either way — whether it is a real tell of higher prices or a tell for a buying climax — we need to watch this carefully.