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SMH’s or INTC?

Recently I have been shorting an equal dollar amount of SMH’s against a basket of Semiconductor stocks I believe will outperform the ETF/Index.  This strategy has been working well but I have been getting killed in the SMH short.  Today I actually decided to take a look at the Index and noticed that INTC and TXN make up roughly 40% .  Once I realized I was basically shorting TXN and INTC  I took a look into the overall technicals in the names and noticed that INTC is trading up into support and closed down 1% today while the SMH’s closed up 50 basis points.

Today at the close instead of hedging my book with only  SMH’s, I shorted $22,000 dollars worth of SMH’s and $22,000 worth of INTC leaving my net exposure at $10,000 while also diversifying my short exposure.

Here’s Intel’s (NASDAQ:INTC) Weekly Chart:

- INTC is trading up into resistance of roughly $22.

-  Resistance is both a downward trendline and the 61.8% retracement level off of the recent lows.

-  INTC showed relative weakness today down 1% vs. SMH’s which closed up 50 basis points.

-  My stop on this trade is somewhere North of $23.00 with a profit target of $16.50 which puts my reward/risk ratio at 5/1.5.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.