$$ Weekly Tech Report

Jan 19-22, 2010
For the annotated chart of $SMH please go here.

SMH

Price closed at $26.93, down $1.59 on the week and right at its 50-day EMA in the neutral zone. Trend line support is expected at $26.50 next week. Note that there is potential "top-bottom support" at ~$27 and ~$26.50. Top-bottom support simply means that in up trends, corrections (i.e. bottoms) tend to find support at previous tops.

Momentum: The bearish divergence foretold last week's correction. RSI dropped to 44, just 6 points above the floor for downtrends. Note that the RSI is more oversold at the current price of $26.93 than it was when price bottomed the week of December 14 and the week of November 16. In other words, despite greater downward momentum (lower low in the RSI), price has yet to go lower than those prior lows. The uptrend is getting tested. If it survives the test and price reverses back up before making a lower low, this is a bullish development.

Volume: Short and medium term averages show accumulation, while long term average is flattening out.

Volatility: ADX fell from 27 to 21 last week while Std Deviation remained unchanged. Volatility is average. No squeeze play is on.

Last Week's Outlook: Still waiting for a pull back. I would not be surprised to see SMH exceed the outer Keltner Channel before correcting back towards the neutral zone.

Next Week's Outlook: We finally got a pull back. Pull backs can be excellent mid-trend entry points. The up trend still looks strong - there is nothing yet to indicate the up trend has changed into a downtrend. Watch to see how price interacts with its trend line as well as potential top-bottom support. In addition, watch how RSI interacts with the floor for up trends (i.e. 38), as well as if a long term positive reversal develops in the RSI.