Tech Sector Chaos Puts Spotlight On Direxion's 3X-Leveraged SOXL And SOXS Funds

An unintentional disclosure by semiconductor equipment specialist ASML Holding N.V. ASML penalized the broader technology sector, with the benchmark Nasdaq index losing 1% on Tuesday. Unfortunately, ASML accidentally released its third-quarter earnings report a day early, causing a ripple effect in the computer chip ecosystem.

As Benzinga Staff Writer Piero Cingari pointed out, the report "revealed a significant revision to its 2025 net sales guidance, now projected between 30 billion euros and 35 billion euros ($32.7 billion to $38.2 billion) — a reduction from the previously stated range of 30 billion euros to 40 billion euros."

Most worryingly, while demand related to artificial intelligence appears to continue to be largely in a bright spot, it wasn't enough to rejuvenate other market segments. "It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness," said ASML president and CEO Christophe Fouquet.

Adding insult to injury, the head executive disclosed that the company's 2025 total net sales may expand to a range between 30 billion to 35 billion euros, which represents the lower half of the guidance that the company provided at its Investor Day conference.

Not surprisingly, the options market lit up for ASML stock, with the market's heavy hitters positioning themselves bearishly. Specifically, professional or institutional investors piled into put options with expiration dates ranging from this Friday to March 21 of next year.

The Direxion ETFs: Nevertheless, the heightened activity in the tech space could offer opportunities in Direxion's leveraged exchange-traded funds. Some of the financial service provider's highest-risk, highest-reward offerings took center stage recently. First, the Direxion Daily Semiconductor Bull 3X Shares SOXL is an ETF that is reserved only for the most optimistic traders.

Second, the Direxion Daily Semiconductor Bear 3X Shares SOXS is an extreme ETF that caters to those holding decisively pessimistic sentiments. Both the SOXL and SOXS seek the daily investment results of 300% (or 300% of the inverse) of the NYSE Semiconductor Index. Given the 3X leverage, these funds are only designed to be held for periods no greater than one day.

Fundamentally, the daily compounding of leverage – especially for the inverse SOXS – is severe in these ETFs. Therefore, it's imperative that market participants maintain positional discipline and exit before the trading session expires.

The SOXL ETF: Although the SOXL fund is in positive territory for this year, the extreme leverage has only resulted in a relatively modest performance.

• After soaring through early July, the 3X-leveraged ETF tumbled badly into early August before entering a choppy consolidation phase.
• SOXL is on the ropes at the moment as the shocking ASML disclosure plunged its unit price below its 50-day moving average.

The SOXS ETF: Due to the overall strong performance of the tech space, SOXS has been bleeding red ink, losing over 63% since the start of this year.

• The overall posture of SOXS is discouraging right now since it can't seem to break the trend of lower lows.
• However, Tuesday's accidental disclosure yielded an almost 18% lift in the 3X bear fund, providing much-needed optimism.

Featured photo by Temel on Pixabay.