Sign InSOXL Stock Shows Mixed Technical Signals Amid Semiconductor Sector Volatility
Summary
Technical Analysis: The Direxion Daily Semiconductor Bull 3X Shares (SOXL) experienced higher trading volume and a 7.70% increase in its closing price, however, mixed technical indicators and high volatility suggest a short-term downtrend with a significant long-term uptrend, making it advisable for investors to cautiously hold the stock due to its potential for rapid fluctuations as a 3x leveraged ETF. [August 29, 2023]
Technical Analysis
Direxion Daily Semiconductor Bull 3X Shares (SOXL) saw a trading volume of 61.27 million shares, surpassing its average volume of 54.89 million shares. Its recent closing price of $23.07 on August 29, 2023 represents a 7.70% increase from the previous trading session.
An examination of common technical indicators reveals a mixed view for the SOXL stock. The Relative Strength Index (RSI14) stands at 50, suggesting neutral movements in recent weeks. However, the MACD (3-month) shows a negative figure of -2.21, indicative of a bearish signal.
Regarding moving averages, the stock's 50-day moving average is $24.12, above the last close price, while its 200-day moving average is at $17.31. This disparity could mean that the stock has been in a short-term downtrend, but it still maintains a significant long-term uptrend. The ATR at 7.89 shows high volatility.
The immediate support level is slightly below the closing price at $22.87 while the resistance level is $25.56. Traders will be monitoring these levels closely in the coming sessions.
Fundamental Analysis
The Price-to-Earnings (PE) ratio of SOXL is 24.89, reflecting the earnings of $0.93 per share on a trailing twelve months basis. The lack of available Market Cap and Shares Outstanding data limits the comprehensiveness of the fundamental analysis.
The recent news pieces surrounding SOXL highlight the stock's potential volatility, with speculations about a possible crash in the Semiconductor sector. Despite this, the adoption of a pair trading strategy with the fund's bear 3X ETF was suggested as an appealing low variance option. Other reports point out the effectiveness of leveraged ETFs and the potential impact of major semiconductor companies' earnings on SOXL.
Outlook and Recommendation
Given the predicted volatility in the semiconductor sector, as stated in the news, one can expect considerable price movements in the short term. Based on the above data, it is predicted that the stock could see a slight drop towards the support level of $22.87 on the next trading day, August 30, 2023.
For the upcoming week, the absence of significant bullish signals and the negative MACD suggest that the stock could remain below its 50-day moving average of $24.12, with possibility to retest the support level multiple times.
Investors are advised to cautiously monitor the stock due to its capacity for rapid fluctuations as a 3x leveraged ETF. Therefore, with respect to the near-term outlook, a 'Hold' recommendation is given for this stock.
