Everybody loves semiconductor stocks right now.
AI is booming, Nvidia’s flying, and FOMO is everywhere.
Please watch the Semiconductors Sector etf (SMH) and myself as we talk about and teach you how to not buy the hype… and instead, read the map.
One of the biggest mistakes investors make is chasing stocks when they’re already stretched far above support and key moving averages.
That’s when risk gets dangerous.
So, what’s the smarter move?
Wait for the dip.
Look for price to stabilize near support—like the 10-day or 50-day moving average, or a prior breakout level.
Then watch for volume and momentum confirmation.
On the chart, at the first circle, the price consolidated under the 50 Daily Moving Average for a couple of weeks. Then, the price cleared both the moving average and the consolidation on a gap. Awesome time to buy.
That gives you something critical:
Defined risk.
And that’s the real edge in trading.
The horizontal line is a great representation of when price gets extended too far above support. In this case, the odds increase for a pause or correction.
And remember:
Resistance isn’t just where stocks stall— it’s also where disciplined traders take profits.
But if it pulls back constructively and buyers step back in? That can create a much smarter entry opportunity.
Sometimes the correction is small, and the price begins to clear the resistance level, especially in a strong trending sector like semiconductors.
That presents a new buy opportunity (see the up arrow) with a different and tighter risk.
Bottom line?
Support and resistance are more than lines on a chart.
They’re the psychology of buyers and sellers.
On the bottom of the chart there are the leadership and momentum indicators.
Also noteworthy as SMH’s outperformance could be waning.
And upward momentum could have peaked.
Learn the structure. Define your risk.
And stop chasing every green candle like it’s your soulmate.
Whether you’re a new investor, active self-directed trader, professional money manager, or high-net-worth investor, we have tools, models, and education designed to help you navigate these markets with confidence.
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
