Larry Tentarelli
Founder & Strategist of Blue Chip Daily, Trend Investing, Breakout Alerts
Semiconductors look set for an upside breakout as the Fed hike plays out as sell the rumor, buy the news. The iShares Semiconductor ETF set its 2026 high two days after Kevin Warsh's first press conference in June, then fell about 29% in five weeks. Since the Fed hiked, it is up 5%, and the massive moves into Friday's close in many big names after the Fed meeting were telling. x.com x.com x.com x.comÂ
SOXX's extreme selling sets up a semiconductor relief bounce next week before another leg lower. Per Heis, SOXX had its third-highest red-volume week and tied its longest nine-day losing streak; the four other top red-volume weeks averaged an 8.4% gain the following week. This is not a heavy bet: preserve capital, keep short-term setups small and accumulate core dips for the long term. x.comÂ
Semiconductor earnings have outpaced prices, making the selloff look more like forced positioning than a broken growth case. Since January 2025, the SOX rose about 114% while reconstructed forward earnings rose about 198%; the estimate is approximate. Hedge funds sold global tech at a greater-than-three-standard-deviation pace in October 5-16, a pattern seen near earlier lows, though another sharp flush could come before a reversal. x.comÂ
Charm-driven market-maker hedging now works against SOXX's options squeeze. The bump was likely fueled by calls: market makers buy deltas as the stock rises, but sell when it stalls and sell more if it falls. Squeezes need constant fuel. x.comÂ
Direxion's 3x semiconductor bear shares could climb above $5, based on the options chain. The position is short-term only and is not worth holding past the day before the reverse split that takes effect before Wednesday's open. x.comÂ
Semiconductors are exposure worth owning even through a 3x leveraged ETF, so SOXL is worth buying on a dip. High implied volatility comes with leverage rather than signaling the uncertainty it would in lower-quality names. The risk is a sharp drop, such as 40% in a week. x.com x.comÂ
Semiconductor stocks feel overextended and need a period of digestion. x.comÂ
Allegro MicroSystems just returned to profitability after a massive increase in data-center income and 125% EPS growth in its last report. The stock is holding a two-month pullback at its 200-day moving average with its lowest MACD reading since the April tariff low, and the chart pattern is bullish on a breakout. x.com x.comÂ
The 3x leveraged semiconductor ETF is exposed to a chip-stock reversal because leveraged ETF decay worsens as volatility rises: the bigger the bubble gets on the way up, the faster capital is destroyed on the way down. Market makers have not marked up future chip volatility enough, making way-out-of-the-money 2028 puts highly likely to triple, though 5x-plus returns would require nailing the timing. Unleveraged semiconductor funds carry no such decay. x.com x.comÂ
War escalation and the midterms will keep investors from increasing gross or net semiconductor exposure. SOXX will take out its July lows before any sustained rally; against a suggested 5% dip and 50% rebound, the path is '5% down then 100% down.' x.com x.comÂ
Intel's chart points to a pending breakout, with its stochastic about as low as it can get and a clean test of the key support-resistance flip inside a pennant or flag pattern. Heavy call flow today, all calls in the last 20 minutes, is a good sign after Friday. x.com x.comÂ
