Hey everyone, this is Matt from the Sang Lucci team. I noticed the Semis sentiment was approaching a buy signal. Since I typically have mismanaged trades in the individual names, I got the idea of playing $SOXL, the 3x leveraged ETF. In this post, I will share my experience using sentiment and levels as an entry indicator.
The Setup
I had an alert set at the 113d EMA and another alert set at the YTD AVWAP: those were my entries. I ran the trade by Ronchero, and while unfamiliar with the $SOXL trade, he liked the setup and approved of my trade plan.
On 8/18, I opened 5 Sept 39c (50 delta) as a feeler at $3.70. I chose the September expiry because there are no weeklies and my previous $SOXL trades only required about 20-30 DTE to trade off of a bullish sentiment signal. I chose 50 delta because they were the highest delta strike with enough volume where the spread would not hurt me too badly.
- Position entered on 8/18: $SOXL Sept 39 call
- Size: 5 lot
- Price: avg. $3.70
The First Entry Was Early
$SOXL gapped down the following day, and I looked for AVWAPs to determine a good area to add to my position. The YTD AVWAP was around $38, and $SOXL opened around $37.40. I decided that I would add another five contracts if $SOXL crossed above the YTD AVWAP today.
- Added to my position on 8/19: $SOXL Sept 39 call
- Size: 10 lot
- Price: avg. $3.35
The Trade Plan Develops And I Adjust
My first target for $SOXL was $41.85, where the 8d EMA and 21d EMA were crossing. We opened at this area on 8/23, so I took profits and rolled half of my original position up to the Sept 43c. My next target was the Fibonacci level at $43.83.
- Position closed on 8/23: $SOXL Sept 39 call
- Position entered on 8/23: $SOXL Sept 43 call
- Size: 6 lot
- Price: avg. $2.83
Letting the $SOXL trade play out
Keep On Rolling
$SOXL continued its rally and test my Fibonacci level at $43.83. Again, I took profits and rolled half of the remaining position up to the Sept 45c. My next target was new all-time highs.
- Position closed on 8/25: $SOXL Sept 43 call
- Position entered on 8/25: $SOXL Sept 45 call
- Size: 3 lot
- Price: avg. $2.90
New All-Time Highs
Congratulations! $SOXL hit new all-time highs this morning, so I took profits and rolled my last contract up to the Sept 50c for a lotto play. Semis sentiment is still neutral, so I will hold my final roll until expiration.
- Position closed on 8/30: $SOXL Sept 45 call
- Position entered on 8/30: $SOXL Sept 50 call
- Size: 1 lot
- Price: avg. $1.94
$SOXL testing ATHs
Final Thoughts
Semis sentiment is exceptionally close to a sell signal, so I assume that my last roll will expire worthless. Nevertheless, the entire trade was highly profitable. I will look to re-enter the $SOXL trade once Semis sentiment approaches neutral and $SOXL is near some level of support.
Final $SOXL trade P/L: risked $3,350 to earn a net profit of $3,090.