The Great Mattsby
Chartist, Gann Theory, Stocks/Crypto/FX
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
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
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
SOXL holders hoping the bull run resumes more slowly misunderstand leveraged ETFs, which move fast in both directions. US leveraged semiconductor ETF assets went from $14B to $163B in three years and now sit at $100B, a 39% drawdown. Even after that, assets remain seven times where the trade started, so the bubble has not popped, only exhaled, and those trapped in 3x products face more of the same. x.comÂ
Leveraged ETFs such as the 3x semiconductor bull fund should never be owned: it lost a third of its value in a single-day crash while individual chip stocks fell only 5%-10%. x.comÂ
SOXS, a 3x bear ETF on semiconductors, gains as AI stocks fall, offering a way to profit from that decline without shorting or buying puts. x.comÂ
3x leveraged ETFs like the ProShares UltraPro QQQ and Direxion Semiconductor Bull 3x are not foolproof long-term holdings and would suffer badly in a dot-com or GFC-style decline. They target 3x daily returns, and the daily leverage reset compounds losses in volatile periods. The Nasdaq one launched in 2010 at the start of a ZIRP bull market; backtested to the late 1990s it would still be underwater. A 2x software ETF holding Adobe, Microsoft and Salesforce was discontinued this April. x.comÂ
The 3x leveraged semiconductor ETF SOXL will certainly go to zero within five years, because its daily rebalancing keeps adding exposure as prices rise and selling at lows as they fall. Leveraged ETFs go to zero even in the biggest bull markets. That answers @nongxiaodefa, who joked about going all in on SOXL and opening the mystery box in five years. x.com x.comÂ
Daily 2x leveraged single-stock ETFs such as the SanDisk 2x fund are poor long-term holdings because volatility decay erodes returns. Over six months SanDisk rose 134% and the 2x fund 155%, double the risk for 1.15x the return; at the peak the fund was up over 800% against about 270% for the stock, then gave nearly all of it back. These funds deliver twice the daily return, not twice the return over time, and losses compound whenever the stock chops. Margin or a larger position is better. x.comÂ
Semiconductor stocks feel overextended and need a period of digestion. x.comÂ