SMH, the VanEck Semiconductor ETF, includes major semiconductor companies like NVIDIA, TSMC, and Broadcom. This fund has about 25 stocks and shows higher volatility because it features large chipmakers. Currently, SMH is rising through a bullish five-wave pattern from the lows of April, according to Elliott Wave theory. The ETF may be in its final Wave 5, with expectations to reach around the $400 mark, even with some short-term ups and downs.

Potential For Upward Movement

The overall pattern suggests more upward movement could occur, completing a smaller five-wave formation within the fifth wave. Positive market sentiment might drive semiconductor stocks higher until late 2025 or early 2026. It’s important to note that investing comes with risks and uncertainties. Individual research is essential. Investors should be aware that they could face losses and emotional stress, as all investment risks are their responsibility. The VanEck Semiconductor ETF (SMH) is continuing its strong rally that started back in April 2025, with an upward trend aimed at the $400 level. This final bullish wave is fueled by positive market sentiment. We view this as a continuation of the strong growth in chip stocks seen this year. Recent data supports this optimistic outlook. The November Consumer Price Index (CPI) report showed inflation cooling to 2.1%, leading us to believe the Federal Reserve will not raise rates in early 2026. Additionally, global semiconductor sales exceeded expectations last quarter, thanks to ongoing investments in AI infrastructure. These factors create a favorable environment for the sector’s continued growth.

Strategies For Derivative Traders

For derivative traders, this is a good time to position for more upside as we move into the new year. We recommend buying call options with strike prices near or above the $400 target, focusing on expirations in January and February 2026 to allow time for the expected move. Another strategy is to sell out-of-the-money put spreads, taking advantage of high volatility to earn premium. We should also be ready for possible short-term pullbacks, similar to what we experienced during the major AI-driven rally of 2023-2024. Dips toward the $375-$380 support zone should be seen as chances to enter or increase bullish positions. The overall upward trend remains strong as long as the ETF stays above the lows reached in October. Implied volatility in SMH options is high, making selling premium appealing, but it also indicates that the market expects significant price movements. This means that while option premiums are high, they might yield big returns if the ETF’s price surpasses the $400 mark. We are weighing the cost of these options against the potential for a strong finish to 2025 and a bullish start to 2026. Create your live VT Markets account and start trading now.

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