Suddenly Super Semiconductor ETFs; But Is It A Home Run?

Markets Benzinga

Semiconductor stocks were drags on the broader technology sector earlier this year, but that trend is reversing, lifting exchange traded funds such as the Market Vectors Semiconductor ETF (SMH) and the iShares PHLX Semiconductor ETF (iShares S&P NA Tec. Semi. Idx. Fd.(ETF) (SOXX)).

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Over the past month, SMH and SOXX are each up more than 5 percent. Recent bullishness from the semiconductor space could prove positive for the U.S. economy. As Benzinga reported last month, semiconductor billings are an important tell regarding the health of the world's largest economy.

Keep Your Eye On The (Money)Ball

According to Andrew Zatlin of Moneyball Economics, the U.S. semiconductor business has been an excellent bellwether for the U.S. economy ever since the bursting of the Dot Com Bubble, Benzinga reported. According to Zatlin, there are several advantages to using the semiconductor business as a signal for GDP. Semiconductor demand is a leading indicator, it provides strong visibility to end-user demand and the business has a fixed production cycle.

Related Link: Zatlin: Semiconductor Activity Pointing To Global Slowdown

That could be spell more good news for the Direxion Daily Semiconductor Bull 3X Shares (SOXL). More because SOXL is up more than 15 percent over the past month. SOXL seeks to deliver triple the daily returns of the PHLX Semiconductor Sector Index, the underlying benchmark for the aforementioned iShares PHLX Semiconductor ETF.

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Root, Root, Root For The Home Team

In cheering for SOXL and/or SOXX, investors are cheering for upside in some familiar semiconductor names. Texas Instruments Incorporated (TXN), Qualcomm, Inc. (QCOM) and Dow component Intel Corporation (INTC) combine for nearly 23 percent of the PHLX SOX Semiconductor Sector Index.

From a technical perspective, SOXL is currently in a short term uptrend. The price action is trending higher with the 7-day moving average currently above the 20-day moving average. The RSI is currently at 59.08 and above the prior reversal level. The RSI recovery from the technically oversold levels on 5/13/2016 has continued to new highs.

The MACD is above the signal line and trending towards the zero line. A continual upward move from here could benefit current price action. The spread between positive DMI and negative DMI continue to expand, supporting a further short-term uptrend, according to Direxion.

Up more than 24 percent this month, SOXL is Direxion's best-performing leveraged bullish ETF on a month-to-date and is topping the second-place ETF on that list by almost 2-to-1 margin.

Traders are taking note. For the five-day period ended May 26, SOXL's volume was nearly 22 percent above the trailing 20-day average, according to Direxion data.

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