SOXL Analysis: Bullish Short-Term Momentum, Caution Advised for Long-Term Investment, 1 month ago Technical Analysis

Direxion Daily Semiconductor Bull 3X Shares (SOXL) closed at $48.59 on May 31, 2024, reflecting a decline of 2.82% from the previous session. The observed trading range for the day was between $44.38 and $50.72. SOXL's trading volume stood at 71.70 million, exceeding its average volume of 65.37 million, hinting at heightened market activity. The interesting RSI14 value of 66 indicates that the stock is approaching overbought territory but has not yet triggered sell signals.

The stock price remains above both the 50-day moving average of $42.98 and the 200-day moving average of $31.33, suggesting a strong bullish trend. The MACD over a 3-month period at 4.52 also supports continued bullish momentum. With an ATR of 6.58, investors should prepare for substantial volatility. SOXL finds key support at $41.42 and resistance at $48.84. Given its closing price is barely below the immediate resistance level, there could be efforts to break above it in the short-term.

Fundamental Analysis

SOXL operates with a market cap of $10.33 billion, supported by earnings per share (EPS) of $0.93 and an elevated price-to-earnings (P/E) ratio of 52.42, indicating strong earnings relative to its share price but also a potentially overvalued stock. The entity boasts a significant number of shares outstanding at 212.55 million, which provides liquidity while affecting volatility due to the large float.

The primary fundamental metric to consider here is that SOXL is a leveraged ETF designed to deliver three times the daily performance of the semiconductor sector. Such leverage magnifies both gains and losses, reflective of the 279.78% increase observed from its year low of $14.01 to its year high of $56.99.

SOXL Short-term Predictions

For the next trading day on June 03, 2024, heightened volume and current RSI suggest SOXL might experience volatility. If it can surpass the resistance at $48.84, a test of the next psychological barrier at $50 might ensue. However, failing to hold above its immediate resistance could see a retest of support levels possibly around $44.

For the upcoming week, the stock is likely to hinge on maintaining momentum above the 50-day moving average. Continued high trading volumes may push the stock price towards its year high given the ongoing bullish trend evidenced by the moving averages and MACD.

Intrinsic Value and Long-term Investment Potential

Considering intrinsic value, the P/E ratio of 52.42 raises concerns about overvaluation, unless future earnings grow substantially. An EPS of $0.93 reflects solid profitability, but the high volatility inherent in a leveraged ETF requires caution. Moving averages suggest positive long-term potential so long as the semiconductor sector continues to exhibit strength. The firm does show capacity for significant returns but at elevated risk.

Overall Evaluation

SOXL should be viewed as a 'Hold' candidate. While technical indicators paint a bullish short-term picture and the fundamentals of the semiconductor sector seem robust, the elevated P/E ratio and intrinsic volatility of a 3X leveraged ETF warrant caution. Potential investors should closely monitor news in the semiconductor sector and movements around the key resistance/support levels to better gauge market sentiment and price action.

Check full SOXL forecast and analysis here.