Semiconductor ETFs Could Get Short Covering Help

Markets ETF Trends

Semiconductor stocks and the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) have been among the leaders of the technology sector’s resurgence this year, but that isn’t keeping some traders from targeting chip stocks for bearish trades.

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SMH and the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) have recently been durable performers as semiconductor stocks are rebounding to steady the broader technology sector, but that does not mean the gains are over for this suddenly hot group.

Related: Tech ETFs with Exposure to Hardware, Internet Segments

SMH targets the semiconductor sub-sector, with large positions in well-known names like Intel (NasdaqGS: INTC) 13.4%, Taiwan Semiconductor Manufacturing (NYSE: TSM) 12.7% and Qualcomm (NasdaqgS: QCOM) 7.7%. The ETF also includes some overseas holdings, including 12.7% Taiwan, 8.5% Netherlands, 6.0% Japan and 5.1% Singapore, along with 66.5% U.S.

“Nasdaq recently released the latest short interest data for the August 15 settlement date, and several prominent semiconductor stocks saw significant gains in bearish bets,” according to ETF Daily News. “Intel saw its short interest rise increase to 75.47 million shares, up from a prior level of 66.39 million. That 13.67% rise in short interest was the highest gain among all semiconductor names in the latest period.”

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Traders looking to make bearish bets on chip ETFs can consider the ProShares UltraShort Semiconductors (NYSEArca: SSG), which takes the -2x or -200% daily performance of the Dow Jones U.S. Semiconductors Index and the Direxion Daily Semiconductors Bear 3x Shares (NYSEArca: SOXS), which provides a -3x or -300% performance of the PHLX Semiconductor Select Index.

Related: Trouble Ahead for Semiconductor ETFs Despite Rally

“It remains to be seen if the elevated short interest in these names will put downside pressure on their share prices, but investors in these individual stocks — as well as ETFs that have large exposure to them — might find it useful to monitor the situation,” adds ETF Daily News.

For more news and strategy on the Technology market, visit our Technology category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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