Semiconductor manufacturers and related equipment and materials companies have been among the top price-moving industries over the past week and month. According to Finviz, the Semiconductor Equipment & Materials group’s 1-week return was 20.22% the Semiconductors group returned 14.20%. For one month, the Semiconductor Equipment & Materials group returned nearly 38%, while the other group returned just over 19%.
Amkor Technology (NASDAQ: AMKR) is one of the semiconductor companies with the most promising technical setup. I will now analyze it from the perspective of a range of technical analysis tools and discuss the monthly, weekly and daily time frames on the Heikin Ashi candlestick charts, complemented by a relevant low frame Renko chart. Due to the number of tools I will be using, I will show two screenshots for each of Heikin Ashi’s three timeframes, as well as one for the Renko chart.
Brief introduction to my favorite technical tools
The first chart setup (I’ll call it Chart 1) uses Bill William’s Alligator indicator and the Awesome Oscillator, as well as the Ichimoku Clouds and On Balance Volume indicator line.
Alligator’s technical analysis tool uses three smoothed moving averages based on five, eight, and 13 periods, also known as Jaw (blue line), Teeth (red line), and Lips (green line), respectively. Due to the smoothing of each moving average, the Jaw makes the slowest turns and the Lips makes the fastest turns. Crossing the lips down through the other lines signals a short opportunity, while crossing up signals a buying opportunity. Visually, too, both lines extend into the future, adding a semi-predictive aspect to the picture, similar to Ichimoku forward plots. However, this is just a visualization, not a future reading. This indicator is useful for spotting trends, but not very useful during choppy periods.
William’s Awesome Oscillator (AO) is a market momentum tool that visualizes a histogram of two moving averages calculated based on median prices of a recent number of periods versus the momentum of a larger number of previous periods. When the AO histogram crosses the zero line, it indicates bullish momentum. On the other hand, when it breaks below zero, it can indicate bearish momentum. There are a number of different interpretations for this indicator, which are beyond the scope of this article. See William’s book Trading Chaos for more information.
Ichimoku Cloud – I don’t use a full set of Ichimoku lines, just the leading spans A and B, whose crosses dictate the color of the cloud and whose individual lines represent levels of the strongest support and resistance levels. In addition, the average values are plotted into the future, which in itself gives a clearer picture, but has no predictive power.
The On Balance Volume (OBV) indicator is a volume based tool and is designed to show the sentiment of the crowd on price. OBV provides a running total of an asset’s trading volume and indicates whether that volume is flowing in or out, especially when viewed in variance with price action.
The second chart setting (Chart 2) uses 2 moving averages (10 and 50 periods) and a view of the 20 period moving average of volume. I also use MACD (Moving Average Convergence Divergence), which is well known to everyone: I look for MACD and Signal crossings and above/below the zero level.
The other two indicators are the Composite Index Divergence Indicator (CIDI) which I learned from Constance Brown’s book and the Directional Movement Indicator (DMI) by J. Welles Wilder.
CIDI is a “child” of the RSI with the momentum indicator. For more literature see Brown’s article or read her book. CIDI was developed to solve the problem that the RSI cannot show divergence. I personally use the CIDI’s crossover above and below its slow and fast moving averages, as well as the position of the averages against each other. I have discovered that CIDIs crossovers can precede important MACD crossovers. However, CIDI is more choppy than MACD, so I use it as an alert for MACD.
As for DMI, I’ll skip the ADX line because it doesn’t do me any good. Instead, I focus on the crossovers of the Positive Direction Indicator DI+ and the Negative Direction Indicator DI-. When the DI+ is above DI-, the current price momentum is to the upside. When the DI- is above DI+, the current price momentum is to the downside.
As for using Heikin Ashi candles and Renko boxes, I use the former as a trend reversal and continuation identification tool. Renko charts do not have a time scale and are based on price movements that must be large enough to create a new box or building block. Similar to Heikin Ashi, Renko charts filter noise.
As you might have guessed, my focus is on identifying the trend reversal and filtering out the noise that allows the position to continue without the risk of too many false signals.
The long-term trend
I use monthly charts for long-term trend analysis. See Diagram 1 below.
November’s Heikin Ashi candlestick has started green. Of course, it can still turn red. The green line of the alligator lips has just crossed the red line of the teeth and both lines are above the blue line of the jaw. All three lines as directed upwards. The Ichimoku cloud is green and we can see a strong support line at the $17.60 price level. AO has started a green bar for November, possibly the start of a new series of green bars. Also, OBV is continuing a recovery that started in October.
See Diagram 2 below.
The November green candle is well above the 10-month MA and its upper wick reached the $25.22 level, catching up with the green candles from the last uptrend in 2021. CIDI has already moved above its fast (green) moving average and is close to crossing above its slow (orange) moving average. DI+ has not even touched DI- and is showing a sharp upward direction. The MACD has bounced and is approaching its signal from below while both lines are in positive territory. In the long term, all technical signals look positive so far.
The medium-term trend
On weekly chart 1, I have plotted a trend line starting on the week of Monday, September 13, 2021. The line touches the wicks of three candles in August of this year. The trendline was broken again by the wick of the October 31st week’s candle and the body of last week’s candle.
On this Weekly Chart 1, we see that both the alligator’s lip and tooth lines have crossed above the jaw line. All three lines as directed upwards. The Ichimoku cloud is approaching transition and color change. Strong S/R lines are found at the $19.20, $20.80, $20.22, and $23.80 levels. AO has broken above the zero level and OBV is nearing its last mid-term high from August.
See Diagram 2 below.
The 10-week MA is slowly approaching the 50-MA from below. CIDI has already moved above both averages (fast is also above slow). DI+ has made a more decisive move over DI- compared to a fairly choppy period between October 2021 and October 2022. Also, the MACD, which has been in a downtrend since April 2021, has made a reversal below the zero level and climbed higher last week, breaking above the zero line for the first time since January this year. Both charts show a couple of turning crosses that merit further attention.
The short-term trend
See daily chart 1 below.
The current upleg was confirmed with a full green candle that opened and closed above all 3 alligator lines on October 21st, although the trend started as early as October 13th. AO also turned positive on October 21. The Ichimoku cloud is green and moving sharply upwards. The trendline was sharply breached above on November 8th.
On Chart 2, we see the 10-day MA rising sharply above the 50-day MA.
CIDI and its fast average shared a crossover with the slow average on Friday, September 30th. The following Monday, October 3rd, both MACD crossed its signal and DI+ DI-. Those with faint hearted may have lost patience when the trend appeared to be just a fake out for the week of October 10th. In this case, noting that each green candle was actually delivered on declining volume would have alerted us to the upcoming shakeout. The trend resumed on October 14th, with subsequent significant crossovers of CIDI, DMI and MACD between October 18th and 24th. We also note that volume has surpassed its 20-day moving average over the past few days. Amkor reported gains on October 31st and the market enthusiastically welcomed the 33% earnings surprise.
A daily Renko chart is useful to visualize the range of possible corrections after the strong run of the past few days. I see a relatively narrow channel between $20.70 and $23.40, but of course a dip down to $18.90 or $17 could dip in. If you think you’re better off catching the next swing, you can consider some of the S/R levels I mentioned in different time frames.
Many tickers related to semiconductors might have similar settings. Amkor is just one of them and looks quite attractive for the next few months of swing trading in my opinion. Since this analysis focused on the technical aspect, you still need to do your own due diligence if you prefer to rely on buy-and-hold/long-term fundamentals.