rewrite this title The Daily Breakdown: Can semiconductors break out?

Semiconductor stocks has been trading well, with names like Nvidia and Broadcom giving a boost to the SMH ETF. The Daily Breakdown digs in.

Monday’s TLDR

Semiconductor stocks are in focus
Jobs report is on Friday
Uber announces a buyback

Weekly Outlook

Markets are trying to start the week on a high note, with the SPY ETF and the QQQ ETF both boasting large gains as tech continues a strong bounce from Friday. If stocks can hold their premarket gains, that will be welcomed news for bulls as the markets have struggled for traction these past few weeks. 

We’re starting to pick up the pace now as the new year unfolds. 

On Tuesday, we’ll get the JOLTs report (job openings), which will give us a glimpse on the health of the labor market. On Wednesday, we’ll get the Fed Minutes, which is a summary from the Fed’s prior meeting in December. 

US stock markets are closed on Thursday as a National Day of Mourning will recognize the passing of Jimmy Carter, who served as President from 1977 to 1981. 

On Friday we’ll get the monthly jobs report, which will show many jobs were added (or lost) in December, as well as provide the updated unemployment rate. 

When it comes to earnings, a few reports will trickle in throughout the week, but the big day is on Friday morning. That’s when Delta Air Lines, Walgreens, Constellation Brands, and Tilray will report their quarterly results. 

For what it’s worth, earnings season will officially kick off next week when the big banks begin reporting.

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The setup — Semiconductors

BODY: The semiconductor ETF — the SMH — has been consolidating for months, but notice the way it has continued to find support from its 200-day moving average and put in a series of higher lows (green arrows). 

With this morning’s rally, the SMH is set to break out over downtrend resistance. 

Bulls will want to see the SMH stay above downtrend resistance, confirming a breakout over this key mark. Further, they’ll want to see the SMH clear the $260 level, which was resistance in October and November. 

If the SMH can do both of those things, bullish momentum could accelerate. However, if the ETF is unable to hold its breakout, the SMH could see more selling pressure in the short term. 

The top holdings in the SMH ETF include: Nvidia, Taiwan Semiconductor, Broadcom, Advanced Micro Devices, and Texas Instruments. 

Options

One downside to SMH is its share price. Because the stock price is so high, the options prices are high, too. This can make it difficult for investors to approach these companies with options. 

In that case, many traders may opt to just trade a few shares of the common stock — and that’s fine. However, one alternative is spreads. 

Call spreads and put spreads allow traders to take options trades with a much lower premium than buying the calls outright. In these cases, the maximum risk is the premium paid. 

Options aren’t for everyone — especially in these scenarios — but spreads make them more accessible. For those looking to learn more about options, consider visiting the eToro Academy.

What Wall Street is watching

UBER – Shares of Uber are in focus this morning after the company announced a $1.5 billion accelerated buyback plan. CFO Prashanth Mahendra-Rajah said the firm is “entering 2025 with considerable momentum” and that the stock is undervalued. 

NFLX – Netflix is also in focus on Monday as WWE Raw will make its debut on the streaming platform. The show is expected to start tonight at 8 p.m. ET. Along with Netflix, TKO Group Holdings — the parent company of WWE — will be in focus too. 

DIS – Disney is nearing a deal with FuboTV, according to Bloomberg News. According to the report, “Disney will fold its Hulu + Live TV business into Fubo, creating a new venture that will be 70% owned by Disney and the rest by Fubo.”

Disclaimer:

Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.