AMKR - Amkor Technology: A Swing At Semiconductors (Technical Analysis)

Summary

• Amkor is benefitting from the hot streak of the semiconductors industry.
• Long-term set up seems to be recovering before an uptrend.
• The current upswing might come to end and bring a correction but with a chance for a new short-term trading opportunity.

Top-Down Selection

Semiconductors manufacturers and related equipment and materials companies have been amongst those industries with the highest price performance in the last week and month. According to Finviz , the 1-week return of the Semiconductor Equipment & Materials group was 20.22%, while the group Semiconductors achieved a 14.20% return. For a month, Semiconductor Equipment & Materials group returned nearly 38%, while the other group returned a bit over 19%.

Amkor Technology ( AMKR ) is amongst the semiconductor companies with the most promising technical setup. I will analyze it now from a perspective of a number of technical analysis tools and discuss the monthly, weekly, and daily timeframes on the Heikin Ashi candles charts, complemented by a relevant low-frame Renko chart. Due to the number of tools I will be using, I will show two screenshots per each of Heikin Ashi three timeframes as well as one for the Renko chart.

Short Intro to My Favorite Technical Tools

The first chart setup (I will call it Chart 1) uses Bill William's Alligator indicator and Awesome Oscillator, as well as Ichimoku Clouds and On Balance Volume indicator line.

The Alligator technical analysis tool uses three smoothed moving averages that are based on five, eight, and 13 periods, called also 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 make the fastest turns. The Lips crossing down through the other lines signals a short opportunity while crossing upward signals a buying opportunity. Also, visually, both lines stretch to the future and add a semi-predictive aspect to the picture, similar to Ichimoku forward-going plots. However, this is only a visualization, not future reading. This indicator is useful for trend recognition but is not very practical in choppy periods.

William's Awesome Oscillator (AO) is a market momentum tool that visualizes a histogram of two moving averages, calculated on median prices of a recent number of periods compared to the momentum of a larger number of previous periods. If the AO histogram is crossing above the zero line, that's indicative of bullish momentum. Conversely, when it crosses below zero, it may indicate bearish momentum. There is a number of different interpretations for this indicator, which is material beyond the scope of this article. For more information, read "William's book "Trading Chaos".

Ichimoku Cloud - I am not using a full set of lines of Ichimoku lines, only the Leading Spans A and B, whose crosses dictates the colour of the cloud and whose individual lines provide levels of the strongest support and resistance lines. Also, the averages are plotted into the future which in its own right provides a clearer picture but has no predictive powers.

On-Balance-Volume (OBV) indicator is a volume-based tool and is supposed to indicate the crowd sentiment about the price. OBV provides a running total of an asset's trading volume and indicates whether this volume is flowing in or out, especially when viewed in divergence with the price action.

The second chart setting (Chart 2) uses 2 moving averages (10- and 50-period), and a view of the volume's 20-period average. I also use MACD (Moving Average Convergence Divergence) which is well known to everybody: I seek crossovers of MACD and signal, as well as above/below the zero level.

The other two indicators are the Composite Index Divergence Indicator (CIDI), which I learnt from the book of Constance Brown, as well as J. Welles Wilder's Directional Movement Indicator (DMI).

CIDI is a "child" of RSI with the Momentum indicator. For more literature, see Brown's paper or read her book. CIDI has been developed to solve the problem of RSI not being able to 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 CIDI's crossovers may precede important MACD crossovers. However, CIDI is more choppy than MACD so I use it as an alert on MACD.

As for DMI, I skip the ADX line because it doesn't give me anything. Instead, I focus on the crossovers of the Positive Direction Indicator DI+ and Negative Direction Indicator DI-. When the DI+ is above DI-, the current price momentum is upwards. When the DI- is above DI+, the current price momentum is downwards.

As for the use of Heikin Ashi candles and Renko boxes, I use the former as a tool for trend reversal and continuation identification. Renko charts do not have a time scale and they are built on price movements that must be big enough to create a new box or brick. Similar to Heikin Ashi, Renko charts filter the noise.

As you might have guessed, my focus is on identifying the trend reversal and filtering the noise that allows the position continuation without the risk of too many false signals.

The Long-Term Trend

For the long-term trend analysis, I use monthly charts. See below Chart 1.

Heikin Ashi candle for November has started green. Of course, it can still turn red. Alligator's Lips green line has just crossed the Teeth red line and both lines are above the Jaw blue line. All three lines as directing upwards. Ichimoku cloud is green and we can notice a strong support line on price level of $17.60. AO has started a green bar for November, possibly a beginning of a new series of green bars. Also, OBV continues a bounce back that was initiated in October.

See below Chart 2.

The green November candle is well above the 10-month MA and its upper wick reached the level of $25.22, 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) average. DI+ has not even touched the DI- and shows a sharp upwards direction. MACD has made a bounce and is approaching its signal from below, while both lines are in positive territory. In the long term, all the technical signals look positive so far.

The Medium-Term Trend

On weekly Chart 1, I have drawn a trend line starting in the week of Monday, September 13, 2021. The line touches on the wicks of three candles in August this year. The trend line has been pierced again by the wick of the October 31 week candle and by the body of the last week's candle.

On this weekly Chart 1, we see that both Alligator's Lips and Teeth lines have crossed above the Jaw line. All three lines as directing upwards. Ichimoku cloud is nearing the crossover and change of color. Strong S/R lines can be found on levels $19.20, $20.80, $20.22, and $23.80. AO has emerged above the zero level and OBV approaches its last medium-term high from August.

See below Chart 2.

10-week MA is slowly approaching the 50-MA from below. CIDI has already moved above both averages (fast is above slow, too). DI+ has made a more decided move above DI-, in comparison to a quite choppy period between October 2021 and October 2022. Also, MACD, which has been in a downtrend since April 2021, has made a reversal below zero level, climbing up and crossing the zero line last week for the first time since January of this year. Both charts are showing some reversal crossovers that should be watched further.

The Short-Term Trend

See below the daily Chart 1.

The current upswing has been confirmed with a full green candled opening and closing above all 3 Alligator's lines on October 21, though the trend started already on October 13. AO turned positive also on October 21. Ichimoku cloud is green and sharply moving upwards. The trendline was strongly crossed above on November 8.

On Chart 2, we see a strong ascent of the 10-day MA above the 50-day MA.

CIDI and its fast average had a shared crossover with the slow average on Friday, September 30. On the following Monday, October 3, both MACD crossed its signal and DI+ crossed DI-. Those with weak nerves could have lost patience when the trend seemed to be only a fake-out in the week of October 10. In this case, noticing that each green candle was actually delivered on falling volume could have alerted us of the upcoming shakeout. The trend restarted on October 14, with the subsequent meaningful crossovers of CIDI, DMI and MACD between October 18 and 24. We also notice that volume in the last few days was crossing its 20-day average. Amkor reported earnings on October 31 and the market welcomed enthusiastically the 33% earnings surprise.

Price Momentum

A Daily Renko chart is useful to visualize the area of possible corrections after the strong run of the last days. I see a relatively narrow channel between $20.70 and $23.40, but, of course, a downswing could dive as deep as $18.90 or $17. If you believe that you better catch the next swing, you can consider some of the S/R levels I have mentioned at different timeframes.

Conclusions

Many tickers related to semiconductors could have similar setups. Amkor is just one of them and looks, in my opinion, quite attractive for the next couple of months of swing trading. As this analysis focused on the technical aspect, you still need to perform your own due diligence if you prefer to rely on buy-and-hold/ long-term fundamentals.

For further details see: