Eleven of the Dow Jones Industrial Average’s 30 members entered Wednesday with a year-to-date loss. Intel (NasdaqGS: INTC), the world’s largest semiconductor manufacturer, is one of those 11 offenders, so it might be accurate to call chip stocks and the associated exchange traded funds contrarian bets at this juncture.
Some investors are already making contrarian chip bets.
“We have seen notable inflows in the Market Vectors Semiconductor ETF (NYSEArca: SMH),” said Street One Financial Vice President Paul Weisbruch in a note out this morning. “Lately the fund has taken in more than $200 million via creation activity although volume has been fairly muted in the product and below average in recent sessions.” [Crazy for Chip ETFs]
With interest in semiconductor ETFs perking up, risk-tolerant investors can look to bolster near-term returns with the Direxion Daily Semiconductors Bull 3x Shares (NYSEArca: SOXL). SOXL attempts to deliver three times the daily performance of the PHLX Semiconductor Sector Index, the underlying benchmark for the iShares PHLX Semiconductor ETF (NasdaqGM: SOXX). [Rumors Spark Flows to Leveraged Chip ETFs]
SOXL is showing investors it is worth a look right now. Entering Wednesday, the fund was up 11.8% this month. Among Direxion’s triple-leveraged bullish ETFs, only the Direxion Daily Healthcare Bull 3x Shares (NYSEArca: CURE) has been better in May. SOXL’s technical are improving as well.
“As the U.S. equity market continues to hold its ground, semiconductor stocks may be showing signs of upward trajectory for a very short term trade. The RSI has continued to move higher, inching towards 60 and beyond. Currently at $59.20 as of the 5/18/15 market close. The MACD’s move slightly above the zero line into positive territory, combined with a higher DMI+ vs DMI-, indicates a stronger technical upward trending confluence,” according to Direxion.
Adding to the case for SOXL is that the ETF has not been displaying a trait that often afflicts other leveraged ETFs, that being a wide gap in returns relative to its underlying index. SOXL’s 30-day variance to triple the returns of the PHLX Semiconductor Sector Index is just 0.08%, according to Direxion data. That is one of the best marks among Direxion’s leveraged bullish ETFs.
Over the past 30 days, SOXL has closed higher nearly two-thirds of the time with an average return of 2.5% on those up days.
Direxion Daily Semiconductors Bull 3x Shares
Charts Courtesy: Direxion