Analysts See Headwinds For Chip Sector

On CNBC's "Trading Nation," Matt Maley of Miller Tabak said he's quite conflicted on VanEck Vectors Semiconductor ETF SMH because the fundamental backdrop isn't very good and the stock is making new highs.

Malley added that the stock is running hot and it's overbought. According to the RSI chart, it's more overbought than it was on April, before the large correction. It's also more overbought than it was on several other occasions during the last 18 months. The analyst expects to see a correction in the name, but he also thinks it would be bullish if the stock makes a large move higher after the correction.

See Also: Texas Instruments Could Fuel A Breakout In The Chip Stocks

Gina Sanchez of Chantico Global said that the ETF moved higher because the valuation of the semiconductor stocks has been very depressed since the China-U.S. clash. She thinks the stock could continue to move higher, but the move is going to be capped by the fundamentals because the outlook for the fundamentals is not that great. Sanchez is concerned that the massive oversupply could drive lower revenues in the second half of the year.