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SMH SOXL Trade Setup & Entry

Although shorting the semis while SMH (1x bullish semiconductor ETF) still inside this bearish rising wedge in the anticipation of a breakdown that has yet to occur is aggressive, my confidence is high enough to establish a starter short position here, with a stop above 67.30. SOXL (3x bullish semi etf) is my preferred trading proxy.

SMH daily Aug 24th

SMH daily Aug 24th

For those unable to short SOXL, the following ETFs can also be used in lieu of an SMH or SOXL short: XSD (1x bullish semi etf), USD (2x bullish semi etf), SSG (2x bearish semi etf) or SOXS (3x bearish semi etf). To gain short exposure to the semiconductor sector, one would either go long (buy) one of the bearish etfs or sell short one of the bullish etfs. Keep in mind that although each of these etfs hold a basket of stocks related to the semiconductor industry, each tracks a specific index such as the Dow Jones US Semiconductor Index, the PHLX Semiconductor index or the S&P Semiconductor Select Industry Index. One potential benefit to shorting leveraged bullish etf, such as SOXL, would be to profit from both a correction in the semiconductor sector as well the potential to profit from a period of choppy, sideways trading, should the semis stall out here & move sideways for weeks or months, similar to the recent price action in the broad market over the last couple of months.

$SOXX daily Aug 24th

$SOXX daily Aug 24th

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Aug 24, 2016 2:34pm|Categories: Completed Trades - Short|Tags: , |4 Comments

4 Comments

  1. Nick G. August 24, 2016 3:11 pm at 3:11 pm

    appreciate this….could you enter the equivalent targets and stop for SO:XL? thanks…

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    • rsotc August 24, 2016 3:46 pm at 3:46 pm

      kolya43- No problem. I’ll post some comparable targets for SOXL at my earliest convenience although keep in mind that the reason I typically only post the chart of the 1x sector etfs along with listing price targets on that chart is due to the fact that the leveraged ETFs, especially the 3x’s, don’t track the index well over time, which creates a distortion in the charts (compare a 1 or 2 yr chart of GDX to NUGT & you’ll see what I mean).

      Add to that the fact that SMH & SOXL track two different semiconductor indexes plus the fact that different etfs may pay out dividends which also adjusts their prices. Therefore, I’ll post some rough price targets for SOXL & SOXS but the best thing to do is to close that position when SMH hits your preferred price target(s). You can either do that manually or if you are away from the computer, most brokers offer conditional order types that will allow you to sell (or buy-to-cover) on stock or etf when a specific condition is hit on another stock or etf, such as SMH reaching the first target.

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    • rsotc August 25, 2016 2:20 pm at 2:20 pm

      kolya43- The approximate equivalent targets to SMH would be 35.64 & 33.95 on SOXL although keep in that due to not only the potential for price decay due to the 3x leverage on SOXL but also the fact that it tracks a different semiconductor index than SMH, those SOXL targets are just rough estimates & it would be prudent to book profits on an SOXL short if & when the commensurate price target(s) that you are holding out for is hit on SMH. Comparable targets for SOXS are 21.40 & 23.50.

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  2. dan123 August 25, 2016 11:22 am at 11:22 am

    Thanks Randy, great work as always

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