Time To Look At VanEck Semiconductor ETF (SMH) As Rebounce For Semi Building

We have seen how the semiconductor stocks were all in the rage, with some of the big names gaining more than 20%, like Broadcom (AVGO) surge 24%.

This also makes Nvidia (NVDA) and Taiwan Semiconductor (TSM) and the rest of the names in semiconductor space, pretty unstoppable in their rally.

Then we start to see these semiconductor names fell after the Trump rally start to diminish.

And we can see that NVDA has shown that it is building a rebounce pretty strongly.

These 3 stocks have lose ground on 18 December 2024 as Fed Projects Fewer Interest Rate Cuts. AI investor favorite Nvidia (NVDA), which had risen sharply earlier in the day, closed 1.1% lower, Broadcom’s shares experienced a downturn today, dropping 6.9%. TSM was up in the early session but fell more than 4% in the afternoon session.

This would be significant as we could be seeing similar if Fed interest rate cuts really came in fewer in 2025, so how we can actually take advantage when semiconductor stocks perform and when it affect almost all members of the highest constituents members.

If we looked over the time frame, SMH is also experiencing similar downside, along with its biggest component stocks, and it is currently trading away from the oversold technical levels.

This could give us a signal that semiconductor stocks are coming back for a rebounce, this might be why I prefer to use SMH over the individual semiconductor stocks, because this could help me to gain without having the need to take position in the individual stocks due to the portfolio effect of an ETF.

The Semiconductor ETF (SMH) is away from oversold region though moving towards overbought, 9-day RSI is hovering at 55. MACD is now at the lowest levels compare to last year.

If we looked at how all the technical aligned in a similar overbought manner, this could signal a significant upside in SMH, and we might be seeing move up towards the higher and longer upside.

The shares is currently trading at a discount to the 20-day moving average making it a potential room for more upside.

I will be looking for a move back towards the prior $240 support area over the coming few weeks.

Current implied volatility (IV) is at by far the highest level of the past year in SMH-standing at the 100% reading. A look at the previous price chart shows just how much IV has exploded in the past week.

SMH implied volatility (IV) is 30.6, which is in the50%percentile rank. This means that 50% of the time the IV was lower in the last year than the current level. The current IV (30.6) is 3.7% above its 20 day moving average (29.5) indicating implied volatility istrending higher.

The current IV (30.6) in SMH is 8.3% above its 20 day HV (28.3) suggesting that options markets are predicting future volatility to trade above the most recent 20 day realized volatility.

Traders frequently use the difference between implied volatility and historical volatility to measure divergence from the mean. Using the 252 HV as the long term benchmark, the implied volatility (30.6) is currently -9.1% below the 252 day HV (33.7) mean.

Low implied volatility suggeststhe market anticipates relatively stable prices.

If we looked at this ETF, the total expense ratio is considered low given the exposure we are able to capture, and with a significant more than 40% year-to-date returns.

This is a good way to take advantage of the bounce we are going to see in the semiconductor technology sector comes 2025.

I am expecting the AI demand to keep driving demand for the chips and semiconductor would benefit well from this demand.

The only things we need to be aware is who shall be the actual winners in this AI race, I would think SMH is a good way to capture the opportunities in semiconductor stocks, not only one or two individual stocks

Appreciate if you could share your thoughts in the comment section whether you think semiconductor stocks would continue to do well in first half of 2025.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.