Philadelphia PHLX Semiconductor Index (NASDAQ: SOX) Potential breakdown of an uptrend channel and continuation of the pullback with the confluence of a bearish divergence on the Moving Average Convergence Divergence (MACD).

1. The price has broken down the US$2990 uptrend channel support after price retested the key US$3160 resistance level recently, which acted as strong resistance in February this year and April-June last year. This provides a bearish signal for further downside.
2. The recent pullback is also supported with a bearish divergence recorded on the Moving Average Convergence Divergence (MACD) technical indicator, which made a lower high from February-April this year while price made a higher high into the resistance in this period.
3. The price could continue to trade lower to retest the support zone at US$2440-2700, where the US$2700 level is confluent with a swing low formed in mid-January this year, a 50% Fibonacci retracement level and the US$2440 level, which is confluent with a lower swing low formed in end-December last year and close to the 61.8% Fibonacci retracement level. The Fibonacci retracement levels are calculated using a swing high of US$3233.94 and swing low of US$2089.82.

CHART LEGEND

Red box = Resistance zone

Green box = Support zone