Direxion 3x ETF (SOXL) Stock Price Has Fallen 16.5% in a Month

The Direxion Daily Semiconductor Bull 3X Shares ETF (NYSEARCA: SOXL) stock price has fallen 16.5% over the past month amid a pullback in the prices of Semiconductor stocks. However, the SOXL stock is still up 105.28% for the year, driven by the massive rally in semiconductor stocks such as Nvidia. 

The recent decline in SOXL stock price can be attributed to the decline in the underlying ICE Semiconductor Index tracked by the ETF. Given that one cannot invest directly in an index, investment managers created ETFs to help people profit from the moves made by indices.

The ICE Semiconductor Index (ICESEMIT) tracks the performance of the thirty largest U.S.-listed semiconductor companies led by Nvidia, Broadcom, AMD, Intel and Texas Instruments. The index moves a certain percentage each day, and the SOXL ETF seeks to deliver three times the movements of the ICE index. 

As a leveraged ETF, SOXL is considered a riskier investment than other ETFs that are not leveraged. The ETF seeks to deliver 300% of the daily return of the ICE Semiconductor Index, which explains the significant decline compared to the underlying index. 

The ICE Semiconductor Index has not fallen by the 16.5% that the SOXL ETF has fallen by, given that it seeks to deliver 3X the returns of the ICE index. Therefore, the ETF shall fall by a bigger margin than the underlying index. 

Given that leveraged ETFs are generally more risky than typical ETFs, retail investors are usually advised to avoid them due to the added risk. Only experienced investors should hedge against other regular positions using the ETFs. 

The SOXL stock price is approaching a crucial long-term support zone at the $18.40 level, and it will be interesting to see if the level shall hold, triggering a rebound in the ETF’s stock price. Investors should keep a close eye on SOXL stock at current price levels. 

The SOXL stock price. 

The SOXL stock price has fallen 16.53% in the past month. Will it keep falling?