Semiconductor ETF a Possible Buy

As a contrarian investor I love poorly performing sectors.  That’s not to say I don’t agree with the old adage that “the trend is your friend”.  Trend following can be a major aspect in trading and calling a bottom or top is, honestly, impossible.  However, I believe that the semiconductor stocks have been pushed so low by the summer downtrend that they’re primed for a reversal.  That’s why I’m considering investing in Direxion Daily Semicondct (SOXL).

This fund seeks daily investment results of 300% of the price performance of the PHLX Semiconductor Sector Index.  That means the stock is triple-leveraged, so it’ll be even more volatile than ROM or SOXX. The fund creates long positions by investing at least 80% of its net assets in the equity securities that comprise the Semiconductor Index and/or Financial Instruments.  For reference, some popular semiconductor stocks include Intel and Cisco.  Now let’s analyze the SwamiChart for more information…

As you can tell, SOXL recently broke the 50-day moving average and is now trading at a 10-day high.  The middle SwamiPredict indicator has an emerging green “buy” signal that was first established on the 24th of June.  And although the SwamiMarket mode is still suggesting that the stock is in a downtrend you can see the beginnings of a yellow “cycle” mode starting to form.  This could be an important development considering that the last “cycle” mode ended over a month ago.  Finally, I just had to include the SwamiVolume indicator because it so perfectly predicted the drop in early March.  Remember, as I explained in my previous post, the increased relative volume at a peak (as illustrated by the white coloration) can be a signal that a reversal could be in the works.

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