Watch an Unlikely Chip Bellwether
This column was originally published on RealMoney on Aug. 3 at 9:08 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.
A few weeks ago I suggested that the Philadelphia Semiconductor Index, or SOX, had a pretty formidable downtrend line that came in around 470, and that this particular area ought to act as a first resistance level.
And for two weeks the SOX has essentially milled around this 470 area.
So it was only natural that my inbox was flooded Tuesday with questions about whether this was a breakout.As I posted the chart of the SOX last night, I must admit it was hard to see that the SOX actually crossed that downtrend line, owing to the fact that the area is so large. I suppose if you are bullish and you squint hard enough and maybe get the magnifying glass, you could call that a breakout. But if we look at a shorter time frame, what most folks might see is that we have run right smack into another area of resistance in this 485-490 area, dating back to the highs of June 2004. All these resistance levels are not what I find so interesting here, however. What I find interesting is the action in Analog Devices (ADI). I know, I know, I can hear you now, telling me how Texas Instruments (TXN) or Intel (INTC) are more important stocks. And you may be right. But I've been posting the chart of Analog Devices for as long as I can remember, and I had this sense that the stock had this tendency to be an early tell when it comes to the SOX. So I did one of those comparison charts and as it turns out, you really can make a case for Analog Devices being a leader in this group.
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