Two key semiconductor ETFs are setting up an opportunity to buy shares as they bounce off their respective 50-day moving average lines.
IShares PHLX Semiconductors ( SOXX ), which sank nearly 3% Tuesday to its 50-day line amid a tech sell-off, rebounded off the support line Wednesday. That gives investors a chance to buy shares, though the market uptrend under pressure heightens risk of all buys.
[ibd-display-video id=449449 width=50 float=left] The ETF ran up 13% from an early May breakout past a 138.06 flat-base buy point before pulling back. It rallied 21% after breaking out from a prior flat base late last year.
SOXX, which marks its 16th anniversary July 10, has attracted nearly $1.1 billion in assets. The fund tracks the PHLX Semiconductor Sector Index. U.S. stocks accounted for 82% of assets as of June 26, according to Morningstar Inc. It carries a 0.48% expense ratio.
Top holdings included Nvidia ( NVDA ), Broadcom (BRCM), Qualcomm ( AVGO ), Texas Instruments ( TXN ) and Intel ( INTC ). Nvidia provided a big boost Wednesday with a 3.5% gain in above-average volume. Mizuho maintained a buy rating and raised its price target on the graphics chip designer to 170 from 145.
[ibdchart symbol="SOXX" type="daily" size="threequarter" position="leftchart" /]
SOXX has outperformed the broader market year to date (through June 27) with a 16.4% gain vs. the S&P 500's 9.1% advance. It boasts three-year and five-year average annual returns of 20.1% and 24.7%, respectively, vs. 9.5% and 15.1% for the benchmark index. The S&P 500 closes the gap with an 8.3% to 8.2% return over the 10 years.
VanEck Vectors Semiconductor (SMH), which tracks the Market Vectors US Listed Semiconductor 25 Index, also bounced off its 50-day line Wednesday. The $678 million fund, launched in December 2011, has 71% of its assets in U.S. equities.
Its top names include Taiwan Semiconductor Manufacturing (TSM), Intel, Qualcomm, Nvidia and Broadcom. Taiwan Semiconductor fell Monday and Tuesday, but also rebounded off support at it 50-day line Wednesday, setting up a buy opportunity. HSBC on Friday lowered its rating to hold from buy but raised its price target on the Taiwanese chipmaker.
[ibdchart symbol="SMH" type="daily" size="threequarter" position="leftchart" /]
Like SOXX, SMH has beaten the broader market with respective YTD, three-year and five-year returns of 15.7%, 20.7% and 23.5%. The fund's expense ratio is 0.36%.
Wednesday's foreign picks remain in a buy zone from their 50-day lines: iShares MSCI EAFE (EFA) and iShares Core MSCI EAFE (IEFA) advanced nearly 1% each, while Vanguard FTSE Europe (VGK) also bounced about 1%.