The SMH, a semiconductor ETF, has been continually reaching new all-time highs, surging over 100% since its lows in April. This growth has been driven by prominent semiconductor firms such as AMD and NVDA, positioning SMH as a leading indicator for the tech and innovation sectors.

The ETF is designed to track the MVIS US Listed Semiconductor 25 Index, encompassing large semiconductor companies like NVIDIA and Intel. Currently, the ETF is moving within an upsloping parallel channel, with the upper limit around the $380 mark, suggesting a potential resistance point.

Channel As A Warning

This channel could serve as a warning for a potential pullback or a consolidation phase before the ETF continues its upward trajectory. Traders have a couple of options: either short sell near the channel’s top or enter after confirming a fall below its lower boundary.

However, regardless of the chosen strategy, maintaining proper risk management is essential. Each setup offers opportunities, but without predefined risks or stop losses, even a robust technical outlook can result in losses. Consistent discipline and patience are necessary when navigating these trading opportunities.

The SMH continues its strong run, hitting all-time highs just yesterday on October 29, 2025, which is a testament to the power in names like NVIDIA. This rally has been incredible, more than doubling since the lows we saw back on Liberation Day in April 2025. However, this move is now testing the limits of a well-defined technical channel.

We are now watching the $380 level closely, which marks the top of this upsloping channel. This area looks like a prime spot for initiating bearish positions, perhaps by buying out-of-the-money puts for November or December expiration to capitalize on a potential downturn. The latest data from the Semiconductor Industry Association showing a slight dip in September’s global sales adds a fundamental reason to be cautious here.

Potential For Break Below Channel

This technical resistance comes at a time when some fundamental cracks are appearing. For instance, TSMC’s guidance during its earnings call last week suggested moderating demand from the consumer electronics space heading into 2026. This hints that the explosive growth phase we’ve been riding might be due for a pause.

For those of us who prefer more confirmation, the alternative play is to wait for a clear break below the lower boundary of the channel, currently sitting near $355. A decisive close below this level could trigger a faster move down, making it an ideal entry point for buying puts or establishing bear call spreads. This strategy sacrifices some potential profit for a higher probability of success.

We should remember that sharp pullbacks are not unusual for this sector after such extended runs. Looking back, we saw a similar over-extended rally in early 2024, which was followed by a quick 15% correction in April of that year. History suggests that parabolic moves often need to cool off before the next leg up.

Regardless of the strategy chosen, risk management is paramount, especially when using derivatives which have time decay and leverage. Setting a clear stop-loss, perhaps on a close back above the $385 level, is critical to protect capital. The goal is to catch a high-probability pullback, not to fight a trend that refuses to break.

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