$SOXL – Ready, set for profits again as the market shifts from fear to greed

CNN Money’s “Fear and Greed” Index oscillates from fear to greed and back again, and most market sectors fluctuate with its shift in sentiment. Today its inevitable shift appears to have begun as the CNN exited the fear zone.

As a result I’ve been looking for an oversold sector that has been known historically to run up hard and fast when the time comes.

In this example, it’s the semiconductor stocks and SOXL, the 3xLeveraged ETF for the sector.  The last time the market shifted from a state of fear to one of greed (see chart below), SOXL rallied from about $29 to as much as $40 a share, approximately a 37 percent advance in less than twenty days.

This what “swing trading” is all about.

Among the top holdings in the ETF are TXN, QCOM, INTC, and BRCM, but more vibrant semis include AMBA, NPTN, SWKS, FSL and AVGO,  and I suppose Apple-supplier NXPI if AAPL mounts rally with the market. Semiconductors (and there are a lot of them) tend to be all over the place so a diversified basket may be best — SMH, for an ETF without leverage, and SOXL for one with leverage.

Not recommending anyone do anything without one’s own due diligence, but as far as I’m concerned, this is a beaten-down sector with a lot of beaten-down stocks (I’m bottom-picking here) and it is likely going to be a sector worth trying to ride on the next rally.

(Click on chart for a larger image)


All is not happy is Dot.Com land…

Call this the bursting of the second “Second Dot.com bubble.”

As the Nasdaq has climbed back to his its 2000 highs, a rally in that time fueled by the frenzy of the  “First Dot.com bubble’, this latest climb has again featured may internet related stocks, notable long-time leaders like AMZN, FB, and IACI, but also many newcomers. It has been less frenzied this time, so less frenzied that few have even noticed the pattern playing out again.

The trouble is many of the newcomers on this rise have already lost their bubble luster.

With such falling rocks as TWTR, P, ANGI, GRPN, Z and YELP, it is not a happy time after moments of over-blown bullish bubblicious fame on the internet.

None of these stocks are bargain buys with the possible exception of ANGI which at least has begun to base at a level just above the dreaded plunge into oblivion below five dollars (making it, at best, a buy it and forget it until it makes money or shows up again as cash on a sub-$5 stop-loss).

GRPN, seemingly slipping forever, may end up on the final slide to nowhere.

History, in the stock market particularly, does, indeed, come around and around and around…

(Click on the chart for a larger image)