Trading The Close Market Recap - 12/18/2025: Semiconductor Sell Signal and NVIDIA, Crypto Head-and-Shoulders Bear Warning

In a fascinating display of market crosscurrents, strong earnings from a sector leader failed to lift the broader industry, revealing a potential undercurrent of weakness that traders cannot afford to ignore. In this afternoon's Trading The Close show, the analysis from guest host Lawton Ho cut through the noise of headlines to focus on what the charts are truly saying. From semiconductors to cryptocurrency to commodities, a series of classic bearish patterns are emerging, suggesting that a period of caution may be warranted. Today, we'll dive deeper into these technical setups, exploring the psychology behind them and the precise levels that could signal the market's next major move.

The Semiconductor Sell Signal

The semiconductor space provided the day's most compelling narrative. Last night, Micron (MU) reported stellar earnings, crushing EPS estimates by about 20%. The stock initially soared in after-hours and pre-market trading, opening up a staggering 14% from its previous close of around $339. This powerful move caused the entire semiconductor ETF (SMH) to gap up over 3.5% at the open. On the surface, this was a story of pure bullish strength. However, the subsequent price action told a very different tale.

Lawton noted the critical divergence: “The bigger story that I'm watching, and why I think it's bearish, even though MU had great earnings, is that the SMH didn't go higher from its opening price. In fact, upon the market open, you saw a little pop, about a 0.37% pop, but continued to fall. And there were major selling pressures in the semiconductor industry, despite Micron's move.”

This is a classic example of a "sell the news" event. The market had already priced in strong results, and the massive gap up provided the perfect opportunity for institutions and traders to take profits. For Micron itself, the high of the day was a masterclass in technical precision. A pre-identified gap fill level at $263.77 acted as a brick wall. Price tagged this level almost perfectly before reversing sharply, pulling back over 6.5% from its highs. This powerful rejection from a key resistance level, despite overwhelmingly positive news, is a significant bearish signal. It suggests that the buying power was exhausted on the open, and sellers took firm control for the rest of the day. For traders, this reinforces the power of pre-defined levels over emotional, news-driven reactions.

NVIDIA's Ominous Formation: The Head and Shoulders

The weakness in semiconductors isn't isolated to just Micron's intraday reversal. A much larger, more ominous pattern has been forming on the chart of the sector's undisputed heavyweight, NVIDIA (NVDA). Lawton’s analysis today highlighted a textbook head and shoulders pattern, a classic technical formation that often signals a major trend reversal from bullish to bearish.

A head and shoulders pattern consists of three peaks: a left shoulder, a higher peak forming the head, and a right shoulder that is roughly in line with the left. These peaks are all connected by a support line known as the "neckline." A decisive break and close below this neckline is the technical trigger that confirms the pattern, signaling that sellers have taken control and a significant move lower is likely.

On NVIDIA's chart, the key points are clear:

• The Head: The highs at $212.
• The Shoulders: The peaks formed in early December and prior.
• The Neckline: A trend line connecting the lows, or "armpits," of the pattern.

The potential implications of this pattern are substantial. The standard way to project a target for a head and shoulders pattern is to measure the distance from the top of the head to the neckline and then project that same distance downward from the breakout point. For NVIDIA, this calculation yields a staggering measured move of approximately 26%. As Lawton cautioned, “Does that mean that Nvidia needs to fall 26%? No… if I get at least 50% of the move done, then I think that that's good. That's generally my target.”

This pragmatic approach is key. A more conservative target for a short position would be around the $147-$148 level, which would still represent a very profitable 13% move. The strategy for trading such a pattern is equally important: one can initiate a short position on a confirmed break and close below the neckline, or for a more conservative entry, wait for a potential retrace back up to the neckline, which should now act as resistance.

Crypto Cracks: A Contagion of Bearish Patterns

The theme of emerging head and shoulders patterns is not confined to the equity market. The cryptocurrency space is exhibiting remarkably similar technical structures, suggesting a correlated risk-off sentiment may be building across different asset classes.

Bitcoin's "Funky" but Valid Warning

Bitcoin's chart also displays a large head and shoulders top. While the left shoulder is disproportionately larger than the right, the pattern remains technically valid. As Lawton humorously explained, “Even though it's a little funky, it's kind of like family members. Just because you have that cousin, looks a little funny over here, but he's still one of the cousins. He's still family. In the same way, this pattern is still valid.”

The measured move on this pattern is breathtaking, projecting a potential 58% decline that would theoretically take the price down to the $34,000 level. It's crucial to understand this is a technical projection derived from the pattern's height, not a definitive forecast. However, it underscores the severity of the bearish risk if the neckline breaks. At the end of the day, disciplined traders must respect what the chart says. “We focus on TA, no BS, just the charts. And for me, that's what the pattern is telling me, that it's bearish.”

For the immediate future, key support levels for Bitcoin are the $83,000-$84,000 zone, followed by the major pivot at $80,000. A break below these levels would bring the massive head and shoulders neckline into play, opening the door for a much larger correction.

Ethereum's Picture-Perfect Setup

If Bitcoin's pattern is the "funky cousin," Ethereum's is the picture-perfect sibling. The chart of Ethereum shows what was described as an "even better head and shoulders pattern" due to its symmetry and clarity. The trading plan here is straightforward: a break and close below the neckline would trigger a short entry, with the first major support target located at the pivot low from June 21st, around the $2,100 level. This would represent a potential 22% drop, offering a compelling risk/reward setup for traders who utilize stop-losses to manage their risk.

Commodities at a Crossroads

The analysis then shifted to the commodities market, where conflicting signals are creating a complex but opportunity-rich environment.

Gold has been trading within a well-defined, up-sloping parallel channel. While this may look bullish at first glance, these patterns are often considered bearish in technical analysis. They can represent a "bear flag" on a larger timeframe or simply a channel that is likely to break to the downside. Gold is currently approaching its previous all-time highs, setting the stage for a potential "bull trap"—a scenario where price briefly breaks out to new highs, luring in unsuspecting buyers, only to reverse sharply and trap them in losing positions. A logical area to watch for a potential short entry would be the top of this parallel channel, somewhere around the $4,400 level.

Silver, in contrast, is far more chaotic. Having rallied an incredible 37% since late November, its chart has gone parabolic, moving "almost like a meme coin." When an asset is at all-time highs and moving this vertically, established resistance levels disappear, making it extremely difficult to identify a clear topping signal. While a pullback is inevitable, trying to time the exact top is a low-probability trade. Patience is required here, waiting for a clearer bearish pattern to form before considering a short position.

Lessons from Earnings Season

Finally, a look at a few key earnings movers provided further lessons in the power of technical levels. FedEx (FDX) reported a double beat on earnings, causing the stock to spike after hours. Incredibly, the stock ran directly into a pivot high from almost exactly one year ago and was rejected. This demonstrates how historical price levels retain their significance over long periods.

Nike (NKE), on the other hand, disappointed investors and saw its stock fall sharply. For those looking to buy the dip, the charts provide a clear roadmap. The first level of potential support lies around $61.35, with a more significant long-term support zone around $58. These pre-defined levels allow investors to plan their entries with discipline rather than trying to catch a falling knife impulsively.

Conclusion: Heeding the Technical Warnings

Today's market action was a powerful reminder that news and price action do not always align. While Micron's earnings were fantastic, the market's reaction in the semiconductor sector was decidedly bearish. This divergence, coupled with the ominous head and shoulders patterns forming in giants like NVIDIA, Bitcoin, and Ethereum, paints a cautionary picture. These are not yet confirmed breakdowns, but they are clear warnings that traders must heed. By focusing on the charts, identifying key levels and patterns in advance, and waiting for confirmation, traders can navigate this complex environment with a logical, probability-based approach, prepared for whatever direction the market chooses next.