This Bear Claw Recipe Calls for Bittersweet Chips

The vertical rally in the semiconductors is suddenly closing in on a major resistance trendline dating back to last Memorial Day, when the chips seemed unstoppable. As we know, however, that proved to be anything but the case, as the semis topped out and trapped a plethora of longs near $60, on the SMH sector ETF. 

Since then, the semis suffered a sharp correction, and then another one, both into the $40s before the latest rally ensued. 

On the SMH weekly timeframe, below, note how price seems to be attracted to resistance trend like a magnet, up around $55. 

First and foremost, bears should likely wait until we see signs of actual evidence of a rollover in the chips, always a critical part of the market, before hitting shorts with any type of meaningful size. We would be looking for the likes of INTC TSM TXN to crack and then punish the inevitable dip-buyers. 

But this chart also gives good perspective on the sharp rally and what it means, as we do not yet have a new uptrend on this timeframe, or anything close to it as long as we keep making lower swing highs. Also note the lack of net progress in the semis dating back to Thanksgiving 2014. 

The rally has been sweet for bottom-fishing bulls in recent weeks, at least for those who precisely nailed the lows in February. But it may very well prove to be bittersweet if the bear claws come out at potential but well-defined resistance.