Semiconductors Ready to Rip - Trading Options for NVDA and AVGO

The weekly candles for SMH have formed a wedge that is ready to break.

Semiconductor stocks have been following NVDA higher and higher throughout 2024 but recently the sector has slowed down a bit.

Will 2025 bring these chip stocks to their knees? Taking a look at the daily candles for SMH does not provide much guidance as they are just oscillating around the 50-day Simple Moving Average (SMA).

RSI does not provide much help either. However, zooming out paints a much clearer picture.

Timeframes are everything and reviewing multiple for your entire watchlist is essential. I find this especially helpful when reviewing sectors.

The weekly candles for SMH give us plenty to be excited about as traders.

SMH weekly candles

Notice the strong uptrend that got extended well above the 50-week SMA but came right back to it without dropping below.

That is nice support!

The consolidation period is tightening and coming to an end. Soon the wedge will break and SMH will pick a direction.

I expect this chart to resolve higher and trading SMH for a move up could be a great way to kick off 2025. The 280 strike calls expiring Feb 21 are tempting me.

Of course, I prefer to trade tickers for individual stocks which has me looking within the sector. Two names setting up nicely are familiar ones.

I’m looking at options trades for both NVDA and AVGO. They are the number one and three holdings for SMH and make up 30% of the ETF.

Let’s get to the N.A.T.E. treatment for each.

(That’s Notes, Action, Targets, Execution for the options trades I’m considering.)