Direxion Daily Semiconductor Bear 3X Stock SOXS gained ground in Thursday’s session after widening to start Wednesday’s trading day and rallying 3% on the open.
The semiconductor sector recently suffered a downturn that lasted from June 6 to June 17, causing SOXS to climb 82% during this period. On June 21, the sector began to rebound slightly, causing SOXS to fall around 25% in consolidation.
The sharp rise in SOXS, coupled with the downside consolidation, has installed the Inverse ETF in a bull flag setup on the daily chart.
SOXS is a triple-leveraged fund that offers 3x daily short leverage to the PHLX Semiconductor Index. The ETF inversely tracks a number of semiconductor companies across its four holdings, with Goldman Sachs Trust Financial Square Treasury Instruments Fund Institutional and a mutual fund accounting for 58% of its weighted holdings.
The other two funds making up the rest of SOXL’s weightings are Dreyfus Government Cash Management Funds Institutional, weighted at 23.28%, and US Dollar, with a weighting of 18.33%.
It should be noted that leveraged ETFs are intended to be used as a trading vehicle as opposed to a long-term investment by experienced traders. Leveraged ETFs should never be used by an investor with a buy and hold strategy or by those with a low appetite for risk.
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The SOXS chart: The SOXS bull flag pattern was developed between June 6 and June 17 and the flag was formed between June 21 and Tuesday. On Wednesday, SOXS reacted to the pattern and broke above the flag’s upper falling trendline. The inverse ETF however did not receive any bullish momentum on Thursday and instead started to consolidate while the S&P 500 had a fairly bullish day.
- When SOXS broke out of the bull flag pattern, the inverse ETF reversed the downtrend it was trading in within the flag formation. SOXS has yet to confirm that a new uptrend will begin as the inverse ETF has yet to print a lower high above the most recent high of $69.30. If SOXS falls further over the next few days, traders can watch the Inverse ETF to form a bullish reversal candlestick, such as a doji or hammer candlestick, above the recent low of $52.57 , which could indicate that the uptrend is about to begin.
- There is a gap below on the SOXS chart between $59.66 and $61.83, which was left behind on Wednesday. The gaps on the charts close about 90% of the time, making it likely that the inverse ETF will fall to fill the empty trading range in the future. Traders can watch the gap to possibly close if and when SOXS forms its next higher low.
- There is resistance above at $70.90 and $76.60 and support below at $63.21 and $58.10.
Traders who are bullish on the semiconductor sector can follow developments Direxion Daily Semiconductor Bear 3X Stock SOXL.
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