SOXL trade ideas
A scaled entry plan for SOXLOne of the best long-term performers in the stock market is the semiconductor sector. With a strong likelihood that AI will change the world in the next 10-20 years and disrupt every other industry, there are big profits to be made in semiconductor companies that are heavily invested in AI research and provide the processors to power it.
That said, the current price point on SOXL is pretty high, so it makes sense to look for a lower entry. With the market (and especially the Nasdaq) turning downward this week on China trade war news, I've developed a scaled entry plan for SOXL. There are four entry points: the recent highs around 198, the high-volume node at 159, and the recent lows near 131 and 90. Normally I triple my position at each level, but I doubt we'll hit the bottom two targets on the current trade war news, so I'm weighting my entries a little more toward the two upper ones. I already made my first entry this morning near 198.
SOXL trend lines to watchSemiconductors have been in a fairly strong uptrend and broke above their parallel channel yesterday, and they could cycle up again later today. However, watch out for the possibility of a breach of the lower trend line, especially if Taiwan Semiconductors earnings are bad tomorrow.
Trading the range on SOXLHere's how I'm trading SOXL right now. I buy when it gets below the red channel and sell when it gets above the red channel. A breach of either of the blue trend lines would indicate a breakout from the current trading range. So I'm keeping a stop loss just below the lower blue trend line.
Today I exited at 170, and my next buy order is at 152.50. I hope to see that Monday, although with trade talks coming up in mid-October, we could easily see the uptrend continue.
In my opinion, semiconductors are overvalued right now. Given the weakness of their earnings, they haven't fallen as far as they should. But if we successfully sign a trade deal, they will explode to new highs regardless of their earnings. So keep an eye out for China news.
Short SOXLA potential reality. But I'll be watching the indicators and switch to a long position accordingly.
Short SOXLThe indicators are telling a clearer story every day. I could be wrong, but I'm still holding my short position. Of course there's always a chance of random news and I am holding some inverse positions to absorb any shocks.
Chip stock volatility could afford cheap entry in OctoberA recent survey of analysts by FactSet revealed that we're in an "earnings recession" right now and that it's expected to get worse in the next quarter. Certain sectors have been particularly hard hit, namely mining and semiconductors. Earlier this year chip companies predicted earnings recovery in the back half of the year, but that's now looking like it won't happen. Chip stocks remain relatively high-priced for now compared to their lows earlier this year, but they could get more volatile in October, especially if a trade deal with China doesn't materialize. October is a volatile month in general, but there are even more reasons for volatility this year. (On the other hand, lowered expectations might be easier to beat on earnings reports, so maybe chip stock prices won't be hit too hard?)
Chip stocks consistently beat the S&P 500 over the long term, because technology is sexy and Artificial Intelligence and Big Data are the future. So for the medium-term or long-term value investor, a temporary earnings recession that depresses prices of chip stocks could be great news. It affords a cheap entry into an extremely profitable sector. Although SOXL is a leveraged instrument that's only supposed to be held for the short term, I like to buy and hold it for longer periods of time. Had I entered when SOXL was around $80 earlier this year, I could have made over 100% in just a few months. Watch the fluctuations and look for oversold levels in SOXL on the hourly, daily, and weekly charts.
Short Opportunity?See indicators and annotated chart. I may switch to a short position next week if the indicators do not recover. Staying long for now and will update you all accordingly.
Volume Profile Analysis Notice how it experiences resistance and support according to the volume profile. Needs to cross the top resistance (in blue) for the potential of a rally. Otherwise it will be rejected quite hard downward.
Volume Profile Explains the recent horizontal channel$soxl $spy
Volume Profile Explains the recent horizontal channel
Could this be a long pattern we saw back in March?Could this be a long pattern we saw back in March?
SOXL: The retracement from $202 is too deep for this to bean impulse. $202 has to be a wave B of 2 top. Expect an A=C decline fow Wave C at $100. Wait for point 1 and 2 to be established to set up the down channel. We should have a fun time riding this down fast and furiously to $100. In between, there might be opportunities to play a countertrend bounce.
SOXL: This Monster of a stock is poised for a breather. Triple top, a perfect 1.618 wave 1 extension for wave 3, and touching the top of the channel.
Semiconductor strength will continue, target 208SOXL attempted a breakout above its channel and above April's highs, but got rejected and dropped back down to support at the 50-hour moving average. Here it's showing renewed strength, with volume turning green and candlesticks looking bullish. I think it will make another run at 202, this time pushing through to previous highs around 208.
SOXL has strong upward catalysts in the form of strong earnings and guidance this quarter. MU got an earnings beat earlier this quarter, and its recent ascending triangle break suggests it may rise to 51.50, for $4 per share upside. (However, MU is 5% overvalued compared to its average analyst price target of $45 per share.) We've just had earnings beats from Taiwan Semiconductor, Texas Instruments, and Intel that imply the sector is recovering in the second half of the year. TSM has 17.5% upside to the average analyst price target! Intel-- SOXL's largest holding-- can still gain $2.50 per share before it reaches the average analyst price target. QCOM, another large holding, has 12.5% upside to the average analyst price target, with earnings coming up tomorrow. A beat by QCOM could trigger the run up through the 202 resistance level.
As always, this is just an idea about how the market will move, not investment advice.
SOXL: After much analysis and consulting with some EW gurus,I am down to two counts, a preferred bullish count where wave 2 is set in stone and wave 3 in progress and a slightly more bearish count where wave B of 2 top just printed last week. The bullish count was a revision of an earlier count which calls for a wave 4 retracement of 38.2% to a target of about $165. In this case, the target is revised upwards to $183.84. Interested traders should monitor this price level carefully. If it holds, the bullish case is likely the winner. If it fails, then watch the next Fib levels of 50% and 61.8%.
The support for the bear count is that wave A (or 2) failed to reach Fib 61.8, and the subwaves of 3 (or B) are mostly 3 waves and hardly look impulsive at all. Also, it had faltered near the long term trend line and the top of the channel as well. Finally an A=C will bring SOXL to the Fib 61.8 retracement level for a wave 2.
Semiconductors entering risky resistance zoneSOXL has good buying volume today, but it looks a little risky moving forward. It's entering a resistance zone from previous highs, and it's got some bearish divergences on the hourly MACD.
Daily RSI is nearing overbought, and daily MACD is nearing resistance at 9. SOXL is still bullish within the channel, but look for a good entry and keep stop losses in place to guard against channel exit.
