by Shane Ormond
On Jan 21, 2020
Now that the Chinese factory is complete (and just in time for a deadly virus outbreak), self-proclaimed “Buff Mage” Elon Musk is turning his attention to Germany, where colonies of bats and unexploded World War II bombs threaten to undermine investor confidence. (Those are not metaphors.)
Yesterday, we looked at a Keltner Channel chart of iShares U.S. Financials ETF, and noted that it was on a pullback from being overbought.
Today’s Chart of the Day is for Direxion Daily Semiconductor Bull 3x Shares (NYSE: SOXL).
SOXL seeks daily investment results, before fees and expenses, of 300% of the daily performance of the PHLX Semiconductor Sector Index. The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
Now, the Daily Price Chart below shows that SOXL has been making a series of 52-Week Highs since May.
Stocks only reach the 52-week high 52-Week High marker if they’re in the middle of a powerful rally.
And since stocks in a price uptrend, as we know, do not advance in a straight line, their price retracements provide an excellent opportunity for us.
SOXL experienced periodic price pullbacks during its strong advance since January.
Traders can use those to get in at a lower risk entry point after a 3 to 5% price retracement as the stock normally resumes its price uptrend after such retracements.
Maximizing Our Profit Potential
On July 8th, SOXL shares had a price pullback. If you had purchased SOXL shares on that date, you currently would be up 80.06% on the stock.
A fantastic return for holding a stock for only 5 months, right?
But if you had purchased the correct option contract on July 8th, you would be up 289.40% right now.
If you don’t think you’re ready to trade options big time, I’ve built out a whole course just for you…
We’ll keep following SOXL’s movements as it climbs higher, and waiting for the perfect price retracement.
Editor, Chart Of The Day