Amid a slew of earnings reports and trade walk speculation, semiconductor stocks and the corresponding exchange traded funds have recently been in the limelight.
Aggressive traders looking to get bearish on semiconductor stocks can consider the Direxion Daily Semiconductors Bear 3x Shares (NYSEArca: SOXS). SOXS attempts to deliver triple the daily inverse returns of the PHLX Semiconductor Index.
Conversely, bullish traders can turn to the Direxion Daily Semicondct Bull 3X ETF (NYSEArca: SOXL), which looks to deliver triple the daily returns of the PHLX Semiconductor Index.
“Semiconductor stocks are somewhat of a canary in the coal mine for technology and broader electronics demand. In turn, some consider tech stocks to be leading indicators for the broader equity markets,” said Direxion in a recent note. “A strong rally in tech can push stocks to new highs, but with the return of volatility, semiconductors will have to rally if markets want to return to a high water mark. So how do you think semiconductors will perform in the near future?”
There are some risks to consider with semiconductor stocks and ETFs. For example, President Donald Trump has pushed for restrictions on trade barriers with China, which might pose a threat to the sector. China is a key market for the global semiconductor industry, consuming more than $100 billion worth of semiconductors or roughly one-third of the world population.
Semiconductor Earnings Engagement
Recently, ON Semiconductor Corporation released its second-quarter earnings results, posting an earnings per share number of $0.46, which bested consensus estimates of $0.45 EPS. Furthermore, their revenue of $1.46 billion ousted last year’s second-quarter revenue of $1.38 billion. Several other marquee chipmakers are set to report earnings in August, which could spell opportunity with SOXL and SOXS.