Unlocking the Potential: Analyzing the Semiconductor Sector through SOXL SOXL reached new 25-month highs between March 1 and March 8, foreshadowed by Benzinga on Feb. 29.
Following the peak, the ETF, a triple-leveraged fund encompassing semiconductor stocks, began a consolidation phase, dropping around 18% from the high of $56.99 on March 8.
This consolidation led to a decrease in SOXL’s relative strength index (RSI) from about 75% to a more stable 56%. With this adjustment, SOXL now holds potential for a significant surge post-consolidation, contingent upon the upward trajectory of key holdings like Nvidia Corporation NVDA and Advanced Micro Devices, Inc AMD.
AMD carries an 8.67% weight in the SOXL fund, followed by Broadcom, Inc AVGO at 8.59%. Nvidia is the third-largest holding at 7.54%.
BofA Securities analyst Vivek Arya recently reaffirmed a Buy rating on Nvidia stock, raising the price target from $925 to $1,100, suggesting a 21% upside potential and signaling a favorable path for Nvidia’s future performance.
For traders who anticipate a downturn in the semiconductor sector or seek to capitalize on a further retreat, the Direxion Daily Semiconductor Bear 3X Shares SOXS offers a viable option. It is imperative to note that Direxion’s leveraged funds are tailored for short-term trades and not long-term investments.
The SOXL Chart: Recent movements in SOXL revealed significant interactions with the $45 mark, showcasing robust support levels and culminating in a triple bottom pattern formation.
- Observing a potential reversal, SOXL displayed a hammer candlestick pattern on the daily chart, indicating a probable local bottom. A further uptrend on Thursday would confirm this pattern and could supersede the recent downtrend.
- A break above Tuesday’s high would signify a bullish breakout from a rising channel pattern prevalent since Dec. 14.
- Bearish traders eye a breach of the $45 threshold to nullify the triple bottom formation and intensify downward pressure.
- Key resistance levels for SOXL are situated at $50 and $55.94, with support levels at $44.97 and $41.60.
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