Should Investors Cash in Their Chips (Stocks) After Deals Send SOX to Highs?

NEW YORK (TheStreet) -- The PHLX Semiconductor Index, known as the SOX, hit a multiyear high earlier this month on news of two big mergers in the chip industry. The question for investors is whether the chip stocks will go higher or are ripe for a selloff.

To help answer that question, here's a technical look at both the SOX and seven stocks that are components of the index.

Last year, SOX outperformed all major equity averages with a gain of 28%. The index set a multiyear intraday high of 751.21 on June 1, fueled by two mergers: Avago Technologies (AVGO agreed to acquire rival  Broadcom  (BRCM) in a deal worth $37 billion, and Intel (INTC agreed to buy Altera (ALTR) for $16.7 billion in a strategy to grow beyond chips for PCs.

Let's take a look at SOX charts to help chip investors determine whether it's time to buy, sell or hold.

Here's the daily chart for the SOX.

Courtesy of MetaStock Xenith

The SOX closed at 712.37 on Monday, down 5.2% from its multiyear intraday high on June 1. The index is above its 50-day and 200-day simple moving averages of 707.82 and 674.38, respectively. The SOX has been above its 200-day simple moving average since Oct. 21, when the average was 596.13.

Here's the weekly chart for the SOX.

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