AI chip stocks lose their steam after Broadcom warning — short the semiconductor
Thesis
A major AI chip company just spooked the market with a weak sales outlook, dragging the whole semiconductor sector down. When momentum suddenly shifts out of a sector that has been heavily crowded with investors, the selling pressure often lasts longer than a single day as people rush to lock in their profits. We are looking to bet against these chip stocks for a continued drop over the coming weeks. If the broader market keeps rotating away from AI, these stocks will likely fall further before finding a bottom.
Strategy approach
Build a mean-reversion short strategy for a basket of semiconductor stocks (AMD, AVGO, NVDA, MU) on the daily timeframe. Enter a short position when the price closes below the lower Bollinger Band (20, 2) and RSI(14) crosses below 40. Exit when RSI crosses back above 50 or a 5% profit target is hit. Include a 4% stop loss.