There’s trouble brewing in the chip sector outside of Nvidia, according to the charts

Outside of Nvidia, semiconductor stocks have faltered during the second half of the year. Since peaking on July 11th, the PHLX Semiconductor Equal Weighted Index has returned approximately a negative 25%, which compares to a nearly 6% gain for the S & P 500 over that same period. A source of downside leadership within the industry has been in semiconductor equipment stocks. ASML Holdings N.V. (ASML) , which is a bellwether in this space, saw an earnings-driven breakdown in October that reversed its cyclical bull trend that been in place since 2022. Now, U.S. semiconductor equipment stocks like Applied Materials (AMAT) and Lam Research (LRCX) are testing key support levels on their charts, putting their cyclical uptrends in jeopardy. Starting with their monthly charts, AMAT and LRCX have each seen their monthly MACDs shift lower for the first time since early 2022, indicating that long-term momentum has weakened notably in a headwind for the next several months. The monthly stochastics for each are not yet oversold, increasing risk that their corrective phases continue into the first half of 2025. For AMAT, it gapped lower last Friday, taking it below support at its weekly cloud model, near $177. Should that breakdown be confirmed with this week’s close, it would be a long-term bearish reversal on the chart. The 2021 high, which is former resistance turned support near $167, is roughly in-line and has the potential to generate short-term stabilization, but a confirmed cloud breakdown would indicate that this level is also vulnerable to breaking. Secondary support is a 61.8% Fibonacci retracement level near $142. Our weekly indicators point lower and show no signs of downside exhaustion, increasing downside risk. LRCX has already confirmed a breakdown below its weekly cloud model in a long-term bearish development and now has a breakdown pending this Friday’s close below the 2021 peak, which is support near $73. Like AMAT, the weekly MACD is negative for LRCX, and there are no signs of downside exhaustion, increasing risk its corrective phase deepens into year-end. Secondary support is a 61.8% Fibonacci retracement level, near $62. NVDA earnings on Wednesday have the potential to generate short-term volatility for semiconductor stocks as a group. However, the bearish setup on the monthly charts of AMAT and LRCX increases the odds that their breakdowns are ultimately confirmed, even if a short-term rebound keeps support levels intact temporarily. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . 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