Mark Newton, head of technical strategy at Fundstrat, says one semiconductor name has broken out of its month-long consolidation and looks poised for fresh rallies.
The News
In a new post on X, Newton says he’s keeping a close watch on Intel (INTC) after it broke out from a cup-and-handle formation, a continuation pattern, on the daily chart.
He also notes that the latest price action in semiconductor names leads him to believe the sector has more room to run to the upside. But he adds that the relative strength index (RSI), a momentum indicator, of semiconductor stocks is hovering at historic levels.
“Monthly RSI on Semis now sits at an 89, which is at/near the highest level since 1995. (Recall that Gold’s RSI also was in the mid-90s in Jan of this year).
While I feel semis are unattractive as a risk/reward between now and the midterms, this week’s impressive snapback and INTC surge don’t make me want to sell just yet. Some minor negative divergence on daily charts, but we’ll need to see more to think trends are starting to wane.”
What It Means for Investors
Newton appears to be saying that while Intel along with other semiconductor names can still ignite a fresh leg up, he doesn’t see current levels as attractive for new market entrants. He specifically looks at the historical RSI level of semiconductors. While it indicates strong momentum, it also suggests massive overbought conditions.
A closer look at Intel shows that the stock has risen by nearly 200% since April with its RSI hovering at levels last seen in January 1997.
Earlier this month, Newton called the big rallies in semiconductor names “unsustainable.”
Meanwhile, Carson Group chief market strategist Ryan Detrick warned that stocks may be in the midst of a “June Swoon,” based on 75 years of historical data.
“June 17th historically kicks off one of the worst 10 day periods of the year. Will we see a June Swoon this year?”
Beyond June, data from National Bank Financial, which tracks the average annual performance for the S&P 500 in the past ~45 years (1980 – 2026), suggest that the next few months will be a difficult time for the market.
Investor Takeaway
While Intel and other semiconductor names continue to flash strong momentum, the data suggest Newton may be right that the risk/reward at current levels is unattractive. In trading, history doesn’t repeat, but it often rhymes, and if the adage remains true, conditions appear to favor long-term investors and dip buyers.
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