Looking to take advantage of the rebound in semiconductor stocks, AMD, Nvidia? This ETF offers 3x leverage

Direxion Daily Semiconductor Bull 3X Shares SOXL traded lower on Tuesday for its fourth straight bearish day, which has seen the ETF fall around 33% in total since the market closed on October 5. .

The semiconductor sector has suffered a sharp decline this year, causing SOXL to fall almost 90% from the January 4 high of $74.21.

Sharp decline in SOXL, coupled with signals that an ETF rebound may be imminent, could provide a solid trade for traders with a high appetite for risk and reward .

SOXL is a triple-leveraged fund that provides 3x daily leverage to upside moves on a variety of semiconductor stocks.

The ETF tracks a number of semiconductor companies through its holdings, with popular companies such as Advanced Micro Devices, Inc AMD accounting for 3.97% of the fund and NVIDIA Corporation NVDA weighted at 5.53%.< /p>

The US government's recent decision to impose restrictions on exports of certain high-end chips to China has weighed heavily on domestic chipmakers, forcing a number of analysts to lower their price targets on companies like AMD. and Nvidia as earnings season approaches.

On Monday, Northland Capital Markets analyst Gus Richard maintained an outperform rating on AMD and lowered the price target from $105 to $80. Similarly, Citigroup analyst Atif Malik maintained a Buy rating on Nvidia and lowered the price target from $248 to $210.

In every bearish cycle, short-term bullish bounces take place. With the way the semiconductor sector is battered, an upside spike is likely on the horizon.

It should be noted that leveraged ETFs are intended to be used as a trading vehicle as opposed to a long-term investment by experienced traders. Leveraged ETFs should never be used by an investor with a buy and hold strategy or by those with a low appetite for risk.

Traders who are bearish on the semiconductor sector can follow the Direxion Daily Semiconductor Bear 3X Shares SOXS.

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SOXL Chart: SOXL was working to print a doji candlestick on Tuesday, which could indicate a rebound will occur on Wednesday.

It should be noted that the candlesticks are lagging indicators, meaning that Tuesday's candlestick will need to be printed for confirmation.

SOXL has been trading in a downtrend since August 4, with the most recent lower high formed on October 6 at $11.92 and the most recent confirmed low printed at 8.74 $ September 1st. 30. Given that SOXL hasn't rebounded to print a lower high in four trading days, at least one upside to form its next lower high over the next few days is likely.

A rebound is also likely as SOXL's Relative Strength Index (RSI) measures around 32%. When a stock or an ETF's RSI approaches or falls to the 30% level, it becomes oversold, which can be a buy signal for technical traders.

When SOXL's RSI fell to the 30% mark on September 30, the ETF jumped around 36% in the next four trading days before rebounding with the downtrend.

There is resistance above at $8.19 and $9.52 and support below at $7.13 and $5.96.

See also: AMD analyst cuts price target by 32% on dismal Q3 numbers

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