An inverse ‘head-and-shoulders’ pattern is forming in this semiconductor stock, charts show
Of the 25 stocks within the VanEck Semiconductor ETF (SMH) , seven components are within 3% of their 52-week highs. ASML is not one of them — it’s trading about 30% below its own 52-week high which, ironically, was set almost exactly a year ago on July 11. However, ASML may be one of the most attractive components in the ETF, with potentially far more upside from current levels. The stock has performed well since its April lows, gaining about 40% through its most recent high in late June. Yet it hasn’t garnered much attention — especially compared to others in the group, including the SMH ETF itself, which is up nearly a whopping 70% from its own April low. What has us most interested in ASML, of course, is the bullish pattern it’s been trying to extend from the past few weeks. Pictured here is an inverse head-and-shoulders formation that dates all the way back to the start of 2025. The price action since mid-May has carved out the right shoulder of this pattern, with ASML breaking out in mid-June. Right now, it’s attempting to hold that breakout. If it can, the upside target of $975 would remain in play. We continue to look for setups like this across the investment landscape — stocks that have rallied off the lows but are still in the process of breaking out from substantial bases. The second chart shows a potential roadmap for how this breakout could unfold. From mid-2021 through the end of 2022, ASML experienced a similar decline and rebound. During that period, every rally attempt failed to break above a steep downtrend line. But when that changed in late 2022, it triggered a powerful rally that extended all the way through July 2024. Now, the stock appears to be following a similar script. After enduring another sharp decline, all prior bounce attempts again stalled below a new downtrend line drawn from the July 2024 high. The current rally, however, has finally pushed ASML back above that line. If history is any guide, this could be just the beginning of a much larger move higher — similar to what we saw in 2023 and 2024. Lastly, here’s a monthly chart in log scale that goes all the way back to the lows of the financial crisis. If we draw an uptrend line from that 2008 low and extend it to the present, we can see that ASML’s turn in April coincided almost perfectly with a test of that long-term trendline — as the chart clearly shows. What makes this significant is that ASML has done this exact same thing four times before, and each instance marked a major long-term trading low. Not only did the stock rally for years following each of those pivots, but it also went on to make new all-time highs every time. That’s the blueprint ASML will be trying to follow again now — with the first step, of course, is successfully holding this breakout attempt. ASML is set to report earnings July 16. Thus, it will be important to see the structure of this bullish pattern breakout remain intact after that release, regardless of how the numbers come in. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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