Oct 19 (Reuters) - Semiconductor stocks have struggled since hitting all-time highs in June, falling 24% from those peaks due to worries about high borrowing costs and future AI infrastructure spending. However, the sector appears ready to pull out of its recent nosedive if it can gain just a bit of altitude, technical analysis suggests.
Technical analysis uses past price action to map out future moves.
What's striking about the Philadelphia Semiconductor Index (SOX) is the extent of last week’s losing streak compared to selloffs in the past.
The SOX, which ended Friday at 11,137, has now fallen for eight straight sessions. That's its longest losing streak since an eight-day stretch in October 2008, during the global financial crisis.
Going back to mid-1994, the SOX has suffered a nine-day losing streak only twice, in July 1996 and May 2006, according to LSEG data. In other words, traders are likely to view last week’s drop as exceptionally long and begin anticipating a rebound.
When technical analysts look for market turning points, they often use statistical measures of momentum to bolster a hunch.
One commonly used tool that gauges momentum is called the Relative Strength Index. The RSI measures the speed and magnitude of price changes, and assigns readings of oversold when they are falling too fast for the market to sustain. Lending support to the rebound hypothesis, the 9-day RSI ended Friday at 21.5, its lowest reading since April 8, 2025 -- the index's closing low at the tail end of what was then a tariff-driven panic selloff.
A particular focus of chart watchers when a stock or index is falling is identifying price points that might provide support -- effectively a floor for the stock – or resistance when it is rising, which works like a ceiling.
Tools widely used in this search include moving averages, trendlines and previous highs and lows. Moving averages smooth out price fluctuations to reveal underlying trends by stripping out extremes. Similarly, trendlines connect significant price levels to show market direction, while previous highs and lows often become sticking points for future price action.
If buyers return, initial resistance sits near the 50-day moving average around 12,064. Beyond that, the SOX would need to rise above the downtrend line from its June peak and the October 6 high at 13,350 to put its record highs back in play.
On the downside, support is beginning to stack up. September lows came in the 11,110 to 11,056 area. Below that, trendline support from the April 2025 low sits near 10,815, while the 200-day moving average – which is currently rising -- is near 10,601. The July 2026 low was 10,445.
What the chart shows:
The SOX fell eight straight sessions, an unusually long losing streak, and its 9-day RSI of 21.5 signals oversold conditions
A move above resistance at the 50-day moving average near 12,064 and the October 6 high of 13,350 could put record highs back in play
Support lies at the 11,110 to 11,056 range, then near 10,815 and the 200-day moving average of 10,601
(Mapping the Market is a daily column written by Reuters journalists. The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or trading recommendations. )
Terence Gabriel is a Reuters market analyst. The views expressed are his own. Editing by Burton Frierson and David Gaffen
