Chip stocks have had quite a run this year. Technicals say be careful from here
Semiconductor stocks have been on a tear and rank among the best performers this year. The VanEck Semiconductor ETF (SMH), a widely watched gauge of the group, is up 39% year to date compared to the S & P 500’s 14% gain — and SMH is up nearly 20% in the past month. But is the move too far, too fast? This week, SMH’s 14-day relative strength index (RSI) jumped above 80, a level many technicians consider extremely overbought. RSI is a technical trading signal that measures the speed of recent gains or losses: below 30 is typically considered oversold while above 70 overbought. A read above 80 is unusual for an ETF like SMH and, over the past decade, as tended to precede weakness rather than mark a fresh leg higher. Since 2015 there have been three other occasions where RSI’s SMH crossed above 80: at 6- and 12-months, forward returns were negative each time. The 2021 setup was the ugliest with the fund dropping a third of its value over the following year. The June 2024 signal wasn’t as severe but the fund still fell more than 12% over the next six months and 5% a year later. The most overbought among the group right now are ASML , Lam Research , Teradyne and Micron , each with an RSI above 79. None of this is destiny — keep in mind this is a tiny sample size — but when momentum runs hot and positioning stretched, history might argue for tighter risk management. ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
<
