The upsloping parallel channel that may finally cause the SMH to pull back
|The semiconductor ETF, SMH, continues its relentless climb, setting new all-time highs yet again yesterday. Powered by the strength of leading semiconductor names like AMD and NVDA, the ETF has seen an incredible run — up over 100% from its Liberation Day lows in April.
As a trader, when I look at the technicals, what immediately stands out to me is the clear upsloping parallel channel that has defined this move. While the momentum remains strong, it’s often at these extremes where patience and precision matter most.
For context, the SMH (VanEck Semiconductor ETF) is designed to track the performance of the MVIS US Listed Semiconductor 25 Index. It holds some of the largest and most influential semiconductor companies in the world — names like NVIDIA, Taiwan Semiconductor, Broadcom, and Intel. Because of its concentration in high-growth chipmakers, SMH has become one of the best indicators of overall sentiment in the semiconductor space. When SMH rallies, it usually means strength across the board in tech and innovation-driven sectors.
Looking closely at the technicals, I have an upsloping parallel channel on the chart drawn across the recent price action, and I view it as a potential warning sign. The top of that parallel currently sits near the $380 area, which aligns with a potential short-term resistance zone. If SMH pushes into that level, I’d expect a pullback or at least a period of consolidation before any further move higher.
For traders, there are two potential plays here: shorting the ETF near the top of the channel or waiting for confirmation by entering on a break below the lower bound of that same channel.
No matter which approach is taken, proper risk management remains key. This type of setup can provide a great opportunity, but without clear stops and defined risk parameters, even a solid technical thesis can turn into a painful lesson. As always, discipline and patience matter most when trading setups like this.
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