2021-06-24

Bull or Bear Market in Miners, Semiconductors

Bullish and bearish patterns tend to fail in the wrong market. In a bull market, expect the bullish setups to succeed. Expect the bearish setups to fail. Buying the dips works. In a bear market, it's the reverse. Bearish setups succeed, bullish ones fail, and selling the rips is profitable.

Below is a mining stock that came across my radar again today. I think there's downside risk to around 90 cents assuming this is a bull market. I can also see (not a forecast) what could be a head-and-shoulders top forming. I've seen this pattern on other mining shares and it gave me pause, but if this is still a bull market most of these patterns should resolve higher.

Similarly, Taiwan Semiconductor could be basing for a breakout later this year. You can imagine if it breaks resistance and moves higher, the current pattern could evolve into a cup. Or it could be setting up for a downturn this summer with a breakdown through horizontal support. If it did break the target is $67, conveniently where a price gap exists (blue line). Since 2009, these patterns typically do not complete or if they do, bottom long before reaching their potential target (exceptions being some sectors such as energy and commodity producers). That will change if and when a bear market begins.
Let's go back to BTC. Since this is the crypto leader, completion of this top would mean the bear market is in the early stage, rather than this being the late stage of a correction. Failure of this topping pattern would be a powerfully bullish signal though.
Here is Dogecoin showing the pattern in TSM above, with mulitple instances of it all resolving higher.
Finally here is ARKK. When a bear market begins, it typically starts in the lower quality names. If the bull market that began in 2009 is finally undergoing a topping process, look for assets such as ARKK to never recover. If the bull market is still going strong, then ARKK should eventually make new all-time highs.

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