14-day Premium Trial Subscription Try For FreeGet Free

SOXL's Ups and Downs Amid Semiconductor Sector Volatility and ETF Leverage

StockInvest.us, 2 months ago

StockInvest.us Fundamental Analysis

The Direxion Daily Semiconductor Bull 3X Shares (SOXL) have experienced ups and downs over the past months, reflecting the volatility of the sector and the leverage of the ETF. The EPS is at 0.93, and with the PE standing at 22.59, the valuation appears reasonable considering the bullish growth potential of the sector. There are some risk factors to bear in mind, especially considering their short-term performance.

News has surfaced suggesting a potential bull flag formation for SOXL, which implies that there may be an upward trend for the stock in the near term. In addition, recent advancements in the semiconductor industry due to the increase in artificial intelligence (AI) usage might spur more growth opportunities in the industry. This could translate to potential benefits for SOXL, given it provides leveraged exposure to the industry.

However, an item of interest is the warning of a possible credit event and high volatility for SOXL. While the inherent volatility of the fund offers trading opportunities, it also means significant risk, which is compounded by its leveraged structure. Additionally, a recent suggestion of forming a pairing trade with Direxion Daily Semiconductor Bear 3X Shares ETF serves to underline the sentiment of anticipated volatility in the sector and the potential risk this could hold for SOXL.

Technical Analysis

SOXL closed at $20.94 on September 12, registering a 2.38% decline from the previous day. The stock currently finds its support level at $20.66 and resistance at $24.02. The 50-day moving average stands above the current price at $24.02, suggesting a bearish short-term trend. The 200-day moving average, however, at $17.79, is lower than the current price, indicating a bullish long-term trend.

SOXL The 14-day RSI at 48 is neutral, signifying balance between buying and selling pressures. The MACD (3-month) of -0.71 suggests a bearish momentum.

The above-average trading activity was observed with a volume of 48.41 million shares compared to the average volume of 53.56 million shares.

Outlook and Recommendation

For the next trading day, September 13, the movement in the SOXL price will likely be dictated by the market's immediate reaction to the prevailing technical and fundamental factors. The technical indicators suggest potential sideways action or possible retreat towards its support level at $20.66.

For the week, the stock's price movements will largely be dictated by broader market sentiments, especially any changes in the semiconductor and technology sectors, including responses to emerging news. Given the stock's current technical indicators and market sentiment, it's predicted to trade within its recent range.

In light of the anticipation of high volatility and potential risk exposure due to leverage coupled with underlying industry uncertainty (evident from the proposed attrative pair trade), SOXL is rated as a 'Hold'. This is also due to its potential for positive price movement, as suggested by the apparent bull flag pattern. However, given the fund's demonstrated volatility and high-risk nature, investors should approach with caution and ensure that they understand their own risk tolerance and investment timelines.

Check full SOXL forecast and analysis here.