Miller Tabak’s Matt Maley: “I’m worried about semiconductor stocks”

A day after Morgan Stanley downgraded Micron Inc, citing “winter is coming” for semiconductor stocks as chipmakers entered “the late stage of their cycle”, Miller Tabak’s Matt Maley says the technical side of things isn’t looking good either.

Matt Maley’s remarks on CNBC’s “Trading Nation”

On CNBC’s “Trading Nation”, Maley said the technical backdrop wasn’t yet bad enough to raise a red flag, but he was “getting a bit concerned.

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“The VanEck Vectors Semiconductor ETF (SMH) is seeing a short-term death cross in its moving average convergence-divergence chart. It has happened eight times in the past year, and each time, it was followed by a decent pullback and several times, a full correction,” Maley added.

The biggest component of SMH is Taiwan Semiconductor – the world’s largest chip manufacturer, which, Maley highlighted, was also testing its 200-day moving average after more than a year.

“It bounced off that level in July, so, that’s positive, but if it fails this time and breaks below it, if Micron and these others drag it down below that level, it’s going to raise a big warning flag for the group,” he said.

John Petrides sees the pullback as a buying opportunity

John Petrides of Tocqueville Asset Management, however, expressed a different opinion during the same interview with CNBC. According to Petrides, the pullback in semiconductor stocks actually makes up for a good buying opportunity.

Petrides is confident that chip demand will remain strong for a very long term as the global economy continues to expand its footprint in machine learning, 5G networks, and electric vehicles. He picked PSI (Invesco’s Dynamic Semiconductors ETF) as a suitable investment for those interested in putting their money in this sector.

PSI is a 32-stock bucket listing notable names like Intel, Texas Instrument, Broadcom, Qualcomm, and AMD.

“Once we get through this sort of logistical nightmare that the world has been stuck in over the past eight months or so, and we should get through it over the next six months, I think the outlook is very strong for the chip sector going forward,” he said.