ETFs Moving on Earnings (SMH, IAT, INTC, USB, PNC)

The amount of big name companies reporting quarterly earnings is heating up as both tech and financial leaders released their reports in the last 24 hours. After the bell on Tuesday semiconductor giant Intel INTC reported earnings that were mixed. On Wednesday morning three large financial stocks, Bank of America BAC, U.S. Bancorp USB,andPNC Financial Services PNC all beat estimates, but investors were not overly bullish.

Semiconductors

The Market Vectors Semiconductor ETF SMH is a basket of 25 chip stocks with a large portion of the allocation in the top holding, INTC. The largest semiconductor stock in the U.S. makes up 18 percent of the portfolio and therefore a big move on earnings will have a direct effect on SMH. The initial reaction to INTC earnings was positive with the stock trading at the best level in two years.

However, SMH is lower by 1 percent as the other stocks that make up the top ten were moving in the opposite direction to INTC. The ETF is now down 5 percent from a decade high set in early April, but it is holding support at moving into oversold territory. If INTC can hold onto its breakout it could be enough to help SMH bounce off support, making the current selling a buying opportunity.

Financials

The iShares U.S. Regional Banks Index ETF IAT pulled back over 6 percent from a six year high over the last few weeks before finding support and bouncing again on earnings. The top two holdings, USB and PNC, reported decent earnings on Wednesday morning. But, the two stocks are moving in opposite directions with USB turning lower after opening higher and PNC holding onto the early gains.

The chart of IAT shows a pattern of higher highs and higher lows over the last year and the most recent pullback holds true to the trend. Depending on how investors react to the earnings from the top two holdings in the coming days, the ETF could be setting up for a great buying opportunity. The ETF is extremely oversold and could be ripe for value investors on the recent pullback.

Based on the pattern of both SMH and IAT over the last couple of years and the earnings that have been reported so far it appears both ETFs are either at or near buy zones. The key is to have a plan in place in the event the ETFs do not hold support and break the current uptrends.