I Am Shorting $SMH As It Hits This Trend Line & Insanity Spikes

The insanity continues in the semiconductor arena. The Market Vectors Semiconductor ETF (NYSE:SMH) surged higher as the whole sector got a major boost on rumors that Qualcomm is in talks to buy NXP Semiconductor. Like many other traders, I wonder about the timing on this news. The rumor was released just as the stock market was collapsing on Deutsche Bank panic. However, that is neither here nor there. Back to the trade.

If you connect all the highs on the SMH over the last four months, there is a perfect trend line. Today's news in the semiconductor sector spiked the SMH to that trend line again. Since the SMH has been unable to get above that level, I am shorting it. This is a classic technical trade. In addition, insanity has reached epic proportions. Whether this rumor is real or fake, the valuations on the semiconductor sector are stretched beyond even an extreme level. From the 2016 lows, the SMH is up 53%. Not normal folks, not even close. With the help of this trend line, I am shorting this sucker and looking for a pull back as we have seen every time this trend line has been tagged. It is a high reward, low risk trade in my opinion.

Jenny
Verified Trader