Riding the Highs and Lows of Semiconductor ETF
SOXL SOXL surged to new 25-month highs between March 1 and March 8, a prophecy made by Benzinga on Feb. 29.
Following the record-breaking highs, the ETF, a triple-leveraged fund encompassing various semiconductor stocks, began to consolidate, experiencing an 18% dip from its peak of $56.99 on March 8.
This consolidation phase caused SOXL’s relative strength index (RSI) to drop from 75% to a more balanced 56%, paving the way for potential upward movement once the consolidation wraps up. The ETF’s future trajectory hinges on the performance of key holdings like Nvidia Corporation NVDA and Advanced Micro Devices, Inc AMD within their upward cycles.
With AMD accounting for 8.67% and Broadcom, Inc AVGO for 8.59% of the SOXL fund, Nvidia stands as the third-largest holding at 7.54%.
Expert Prognostications and Facing the Alternatives
Recently, BofA Securities analyst Vivek Arya reiterated a Buy rating on Nvidia stock and boosted the price target from $925 to $1,100. This upgraded target suggests a 21% upside potential, signaling Arya’s optimism about Nvidia’s future performance.
While optimism abounds, some traders bear a pessimistic view towards the semiconductor sector and may opt to monitor the Direxion Daily Semiconductor Bear 3X Shares SOXS.
It’s important to note that Direxion’s leveraged funds are tailored for short-term trading and are not recommended for prolonged holding periods.
Charting the Course for SOXL
- SOXL exhibited a rebound near the $45 mark on Monday and Wednesday, akin to its performance on March 5. This consistent bounce suggests robust support at that level, resulting in the formation of a triple bottom pattern.
- Wednesday saw SOXL striving to form a hammer candlestick on the daily chart, implying a potential local bottom. A rise in SOXL’s trading on Thursday could confirm Wednesday’s candlestick and propel the ETF above Tuesday’s high, nullifying its recent downtrend.
- An upward break past Tuesday’s high would also signify a bullish departure from a rising channel pattern that SOXL has adhered to since Dec. 14.
- Bearish traders would anticipate SOXL falling below the $45 mark to invalidate the triple bottom pattern, potentially intensifying downside pressure.
- SOXL faces resistances at $50 and $55.94, with supports lying at $44.97 and $41.60.
Featured image sourced from Shutterstock
