Sign InSummary
Fundamental and technical analysis indicate that the Direxion Daily Semiconductor Bull 3X Shares (SOXL) is likely to experience a short-term price increase, making it a risky buy for risk-tolerant investors, but the high RSI and volatility of leveraged ETFs should be considered. (July 13, 2023)
Fundamental Analysis
The Direxion Daily Semiconductor Bull 3X Shares (SOXL) is an exchange-traded fund that trades on the AMEX. The fund's objective is to provide daily investment results and it's generally leveraged 3 times to the daily performance of the PHLX Semiconductor Sector Index.
The most recent closing price of SOXL was $27.28 as of July 13, 2023, reflecting a 6.19% increase or $1.59 gain. This degree of change indicates significant trading volume coupled with high investor interest, which is corroborated by their volume of 26.49 million; albeit lower than their average volume of 60.20 million.
On a yearly basis, SOXL has experienced a high of $28.03 and a low of $6.21. This represents incredibly wide price volatility, a typical characteristic of leveraged ETFs.
In regards to the company's financial health, the earnings per share (EPS) is $0.93. Plugging this and the closing price into the Price-to-Earnings ratio formula, we get a P/E of 29.42 which indicates that investors are willing to pay a premium price for SOXL's earnings – a sign that they expect higher growth from the fund in the future.
Relevant news reports show that there is a surge in interest in the artificial intelligence industry. Companies like Advanced Micro Devices, Inc., Broadcom Inc., and Nvidia Corporation, that SOXL invests in have been performing well, which could have triggered SOXL's price increase.
Technical Analysis
On the technical side, the Relative Strength Index (RSI14) for SOXL stands at 66, indicating that the stock is nearing an overbought territory. This can be a sign of a potential future reversal.
Working with the moving averages, SOXL's recent surge has placed the 50-day moving average at $20.69 and the 200-day moving average at $14.87. Since the prices are well above both the 50-day and 200-day moving averages, this is a potential bullish sign.
The Moving Average Convergence Divergence (MACD) for SOXL is currently 0.40. Positive MACD values, which occur when the shorter EMA is above the longer one, are a bullish signal.
Prediction and Recommendation
Taking into account the positive fundamentals and bullish technical indicators, SOXL is likely to experience a price increase in the short term. For the next trading day, July 14, 2023, we expect the stock to continue its upward trend though possibly at a slower pace due to its high RSI figure.
Over the upcoming week, the stock price may continue to climb due to continued positive signals. However, as the RSI moves further into the overbought area, caution is advised as this could signal a future price correction.
In conclusion, for a risk-tolerant investor looking for short-term gains, SOXL can be categorized as a risky Buy. Its positive fundamentals and technical analysis indicators show bullish signs, but the high RSI and the inherent risks that come with leveraged ETFs underline the need for caution and careful monitoring.
