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SOXL SMH Trade Entry & Setup

If at first you don't succeed,... After reviewing the semiconductor sector & individual components in detail last night, I have decided to go ahead and add SMH (with SOXL, the 3x bullish semiconductor ETF, as a possibly proxy for those that have the ability to short it) as Short Trade Setup once again. The official entry for both will be any move below SMH 68.36 (just below support). For simplicity in tracking these trades, the entry price, targets & suggested stop for SOXL will be correspond to those levels on SMH (1x or non-leveraged semiconductor ETF). However, I have provided some approximate targets for those that prefer to short SOXL in order to take advantage of the possible price decay due to the 3x leverage.

SMH will trigger a short entry on any move below 68.36 with price targets at 62.64,  61.13 & 60.35 with a suggested stop above 70.50. The suggested beta-adjustment for SMH is 0.9 and 0.3 for SOXL (in order to account for the 300% leverage). My preferred target at this time is T2 at 61.13 which is set just above the July 18th gap. Also note that I have numerous individual semiconductor short trade ideas that will also likely be added as official trade ideas. As such, one should make so to leave room for additional exposure to the semiconductor sector if they plan to add any individual stocks in addition to the sector ETFs (which would provide overlap & possible over-exposure to the sector).

note: As I finished composing this post, SMH/SOXL has now triggered an entry on a move below 68.36 and as such, is now an Active Short Trade.

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Oct 11, 2016 10:18am|Categories: Completed Trades - Short|Tags: , |4 Comments

4 Comments

  1. Shambo October 11, 2016 10:53 am at 10:53 am

    nice Randy. I’ve been watching soxl for an intraday entry and just took it off a lower high on the 5 min chart.

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    • rsotc October 11, 2016 12:05 pm at 12:05 pm

      G-luck on the trade Shambo. Semis one of the better looking shorting opps out there right now & looks poised for a swift move lower, assuming the $NDX breaks down soon (which appears likely).

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  2. shawnyvr October 16, 2016 5:36 pm at 5:36 pm

    Are you shorting SOXL by using option or is this can be shorted as an equity by itself?

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    • rsotc October 17, 2016 11:54 am at 11:54 am

      SOXL can be shorted as with any other ETF, as long as your broker has the shares available to lend in your margin account. Other options besides shorting any of the 1x semiconductor ETFs (SMH, XSD & SOXX) would be going long any of the inverse semi ETFs, such as SOXS (3x bearish/short) or SSG (2x bearish) or you could short the 2x bullish semi etf, USD. The potential issue with going long the leveraged short ETFs, especially the 3x’s like SOXS, is that even if the trade plays out but it takes a while (weeks or months) to hit the price target(s), especially if the semis grind around in a choppy sideways-to-lower trading range before getting there, is the decay that the leveraged ETFs will suffer.

      I will say that my expectation is for a relatively swift move down to at least the first price target on SMH, with my best guess being that target will be hit within the next 2-3 weeks & quite possible sooner so if that is the case, then going long any of the leveraged short semi ETFs should be fine as they would suffer minimal price decay. There’s a detail explanation of how the leveraged ETF decay works on the FAQ page under the ETF related questions.

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