Sign InDirexion Daily Semiconductor Bull 3X Shares (SOXL): Potential Buy with Bullish Momentum
Summary
Direxion Daily Semiconductor Bull 3X Shares (SOXL), an ETF leveraged against semiconductor stocks, has been steadily climbing and shows bullish indicators in both technical and fundamental analysis, making it a potential buy, however, caution is advised due to potential market volatility and a high PE ratio. (Analysis conducted on June 29, 2023)
Company Overview
Direxion Daily Semiconductor Bull 3X Shares (ticker: SOXL) is an ETF leveraging 300% against the semiconductor stocks, listed on the AMEX exchange. As of June 29, 2023, the ETF's closing price was $23.81 with a modest increase of 0.38%.
Technical Analysis
SOXL's Relative Strength Index (RSI) is 56, suggesting it is neither overbought nor oversold. The ETF has been steadily climbing in recent weeks with the 50-day moving average at $18.83 and the 200-day moving average at $14.28. This indicates a bullish trend in the short and medium term.
Moreover, the Moving Average Convergence Divergence (MACD), a core technical indicator for traders, stands at 2.36 over three months, further suggesting a potential upward trend. The ETF has been trading between $23.17 and $24.11, with its highest yearly price at $26.79 and the lowest at $6.21.
Fundamental Analysis
The company's Price to Earnings ratio, a solid valuation measure is currently at 26.75, which can be seen as relatively high compared to industry peers. However, the Earnings per Share (EPS) stands at $0.93, which suggests good profitability. The market cap and shares outstanding are both not available, limiting further valuation analysis.
However, the trading volume for SOXL, pegged at 16.58 million is less than the average volume of 63.57 million, suggesting less trading activity than usual.
Market News
Several recent news articles highlight the increasing global competition in the semiconductor industry, particularly between the U.S. and China, which is driving the bull run of SOXL. It was reported on June 8, 2023, that the heated competition has contributed to the ETF's surge by over 100%.
However, another article published on June 5, 2023, suggested that the ETF might face a pullback in June. This was predicted due to the sector's high valuation and elevated implied volatility, which could be problematic for a leveraged ETF like SOXL. Upcoming events such as the Bank of America Securities Global Technology Conference and Nvidia's annual shareholder meeting were also mentioned to potentially increase volatility.
Price Predictions
Given the bullish technical indicators and the global competitiveness news, the next trading day on June 30, 2023, might see a slight increase in the ETF's price if the current momentum is maintained. However, investors should be wary of the potential volatility and pullback as suggested by recent news.
Over the upcoming week, the ETF's price should trend upwards if the momentum from global competition keeps driving the semiconductor industry. However, investors should remain cautious due to potential market events and high volatility.
Final Evaluation
Considering both the technical and fundamental analysis along with recent market news, SOXL appears to be a potential Buy. The bullish trend suggested by the moving averages, coupled with the momentum from global competitiveness in the semiconductor industry, provides a positive outlook.
However, investors must remain cautious of potential market volatility and the high PE ratio, implying an overvalued asset. As always, investors should consider their risk tolerance and investment horizon before making a decision.
