Bearish On The Semiconductor Sector Following AMD Earnings Reaction? This Fund Offers 3X Leverage

Direxion Daily Semiconductor Bear 3X Shares SOXS was surging almost 13% at one point on Wednesday following a bearish reaction to Advanced Micro Devices AMD quarterly earnings print. 

A US sovereign credit downgrade issued by Fitch Ratings was also pulling the general market considerably lower.  

SOXS's move higher came after the ETF printed a bullish double bottom pattern on Monday and Tuesday, which suggested a bullish break higher was on the horizon for the bearish fund. 

The semiconductor sector had been experiencing a bull cycle, with NVIDIA Corporation NVDA flying in blue skies amid reports the company will become an anchor investor in Softbank Group Corp-backed British chip designer Arm IPO. The news had helped to pull Advanced Micro Devices higher. 

SOXS is a triple-leveraged fund that tracks a variety of stocks in the semiconductor sector. AMD makes up 7.23% of the fund, while Nvidia is weighted at 8.4%. 

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Traders who are bullish on the semiconductor sector can track the Direxion Daily Semiconductor Bull 3X Shares SOXL 

It should be noted that Direxion's leveraged funds are designed for short-term traders and shouldn't be held for a long period of time. 

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The SOXS Chart: When SOXS surged higher on Wednesday, the ETF rejected from the upper descending trend line of a falling wedge pattern. Although SOXS may continue to consolidate under the area for a period of time, the pattern leans bullish for an eventual break higher. 

• For now, SOXS is trading in a downtrend, making a series of lower highs and lower lows. The fund's most recent lower low was formed on Monday at $8.17 and the most recent confirmed lower high was printed at the $9.73 mark on July 26. 
• If SOXS eventually breaks up from the wedge pattern and forms a higher high, the downtrend will be negated and a longer-term uptrend could be on the horizon. The fund has been seeing increasing volume over the last three trading days, which suggests the bears have become more interested in the semiconductor sector. 
• SOXS has resistance above at $11.11 and at $12.62 and support below at $8.17 and at the psychologically important $8 mark. 

Read Next: What’s Going On With Nvidia Stock Wednesday?