SOXX (iShares PHLX SOX Semiconductor ETF) will be added as an Active Short Trade here on the backtest of the channel mid-point following the recent divergent high. With earnings season just getting underway & several leading semiconductors stocks scheduled to report earnings & provide forward guidance in the coming days & weeks, I was going to hold off to see how the sector reacted to the slew of earnings reports but upon further review of the charts, my confidence is high enough that a breakdown in the semis is imminent at this time to go ahead and short the sector in anticipation of a correction that may have kicked off with the disappointing earnings report from TXN (Texas Instruments) last night & the market’s negative reaction so far today.
SOXX daily Jan 24th
The price targets for this trade are T1 at 164.78, T2 at 151.60 & T3 at 139.65. The maximum suggested stop* is any move above 196.40. (*the suggested stop is typically calculated based on the final target. Consider a lower stop if only targeting T1 or T2). The suggested beta-adjustment for this trade is 0.90.
SOXS (3x bearish semiconductor ETF) tracks the same index as SOXX & could be used in lieu of a short on SOXX for those wanting to gain short exposure to the semis in a non-margin account where shorting is not permitted. However, be sure to account for the 300% leverage when determining your positions size. I plan to follow up with a video on the semis asap but wanted to get this trade idea out before then.