Key chip stock index flashing 'ominous signals,' says BTIG
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An important index for chip stocks is flashing a technical warning sign, possibly signaling a drawdown of as much as 17%, according to investment bank BTIG. The Philadelphia Stock Exchange Semiconductor Index (SOX) has gone up or down by 3% on 15 different occasions in the previous 30 trading days. On Thursday, it again closed up 3% – above its 50- and 200-day moving averages but below its 20-day moving average. This fluttering after a big positive run could mean a pullback is coming, BTIG said. "The only other periods we have seen 15 days of 3% or greater moves within a 30 day period while being above the 200 day moving average was Feb./March '99 and Feb. to July '00," Jonathan Krinsky, the firm's chief market technician, wrote Thursday in a note to clients. "While this was too early of a signal in '99, it had ominous outcomes in '95, '97, '00, '20, and '24 preceding -17% or worse drawdowns," he added. It's been a volatile week for the SOX. Before closing up 3% on Thursday, it was up 2% on Wednesday, down 4.7% on Tuesday, and up 2% on Monday. The index gained 22% in May and 11% in June but is down 9% so far in July. The year-to-date gain is still above 80%. .SOX YTD mountain Philadelphia SE Semiconductor Index year to date Other analysts were making comparisons on Thursday to the 2000 era with regard to semi runs. Looking at Russell 2000 's semiconductor stocks, analysts at Jefferies noted that their 3-month gain of 104.4% is even better than the gain of 96.6% just ahead of the dotcom crash in February 2000. However, Jefferies analyst Steven DeSanctis sounded more sanguine about the forward trajectory for the group in relation to the recent surge. "Subsequent performance after very big leaps on average has been still good for the group with the average 3-month return coming in at 7.0%, 15.4% for 6-months," he wrote on Thursday. Shares of South Korean memory chipmaker SK Hynix are set to start trading on the Nasdaq on Friday, and multiple Wall Street trading desks have noted that the influx of new shares could be a catalyst for a major move. Morgan Stanley traders said Tuesday that the new Hynix supply presents a "case for more downside," with traders at UBS making similar comments. Hynix is seeking to raise almost $30 billion in finance capital with an issuance of 18 million shares in order to buy photolithography machines and build new facilities.