Even within sectors which are doing well or doing poorly, there can be significant differences in performance within a group that can be uncovered by relative strength analysis.
Microchip Technology (MCHP), for example, is part of the Electronics and Semiconductors sector which is one of the top groups in the SIA Charts Stock Sectors rankings. Technology stocks in general and chipmakers in particular have done well in recent months with companies like Nvidia* and Broadcom* among the top performing stocks in SIA Charts NASDAQ 100 Index Report.
Microchip (MCHP), has underperformed by rising at a slower pace than its peers. Back in August, MCHP fell out of the green zone of the SIA Charts NASDAQ 100 Index Report back in August. Since then, the shares are up 3.7%. This is well short of the 15.6% gain posted by the NASDAQ 100 Index over the same time frame, let alone some of the leading stocks in the sector.
Last month MCHP fell back into the Red Unfavored Zone and continues to trend downward. Yesterday it finished in 67th place, down 16 spots in the last month.
*Shares of Nvidia and Broadcom are held in some portfolios managed by SIA Wealth Management.
Candlestick Chart Sees Emerging Distribution:
Toward the end of last year, Microchip Technology (MCHP) shares soared from the bottom to the top of a $70.00 to $94.00 trading range. Over the last two months, since faltering near the top of that range, the shares have started to come under distribution with a downtrend of lower highs emerging and the shares falling back under their 10-week moving average.
A close below $82.00 initial support would complete a bearish pending descending triangle and signal the start of a new downswing that could retest the channel bottom near $70.00 based on a measured move. Initial resistance has dropped toward $87.25 where a downtrend line and the 10-week average converge.
Point and Figure Chart Stagnates After a Failed Breakout:
Microchip Technology (MCHP) shares staged a big rally over November and December, driving up from the bottom to the top of the trading range. In December, however, the shares ran into resistance at their August high near $93.65 and once again failed to break out.
Since then, the shares have been backsliding. A close below $83.05 would complete a bearish pending double bottom pattern and signal the start of a new downswing. Should that occur, the next potential support may emerge near $80.65, $75.95, or $70.15 based on previous column lows and highs. Initial resistance on a bounce may appear near $87.35 based on a 3-box reversal.
With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 5 out of 10, MCHP is exhibiting short-term weakness against the asset classes.
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