After the huge drop, one phenomenon has been truly remarkable:
SOXLUSDT’s 24-hour trading volume on Binance exceeded $12 billion, second only to Bitcoin and ETH. Even the trading volume for SNDK contracts is extremely high.
SOXL may now be crowded with dip buyers, trapped holders, and short-term traders ready to take profits at any moment.
Are these traders really buying the dip, or just taking each other’s money?
The biggest problem for SOXL right now is layer upon layer of sell orders overhead.
I think there are at least three groups of people in the market right now.
First, those who bought around $70–$100.
Some of them have surely already been stopped out or liquidated, but those still holding may just be waiting for a rebound so they can cut their losses and get out.
The second group: people who bought the dip around $60.
I think this group is particularly worth watching,
because by the time SOXL fell to $60, it had already dropped a lot, so some people must have thought it was near the bottom.
But it went straight down to around $40.
When it later rebounded to $50–$55, some may have thought: Forget it, I'd rather take a smaller loss and get out quickly.
The third group: people who entered around $40.
This group has a low cost basis, so a rebound to $50 would already give them a decent return.
Especially with leverage from contracts, many short-term traders may have no intention of holding for the long term.
So here's the question:
The higher SOXL climbs, the more people may want to sell.
Some will take profits, some will cut their losses, and some will wait to break even.
That's also why I think that even if a rebound happens, it may not climb smoothly all the way back to $60 or $70.
Of course, how large this potential selling pressure is depends on actual trading activity; we can't judge based solely on cost basis.
Right now, bullish sentiment around SOXL is crowded, but a genuine uptrend has yet to take shape.
And if selling pressure eases, a wave of short covering could also trigger a sharp rebound.
So I think we're likely to see more violent swings ahead, rather than a simple one-way rally.
I went long at $43, but I'm only looking to capture one leg up
Earlier, I opened a long position in SOXL around $43, using 8x leverage.
The logic is simple: I think semiconductors still face valuation and cyclical risks in the medium to long term, but the combination of political news and panic selling has caused an excessive short-term drop, making a small position worth the risk for a rebound;
My view on this hasn't changed for now.
$55 is the main level where I'm considering taking profits; $65 is just an extended target in the event of a strong rebound.
If it rises to $55 but buying clearly fails to keep pace, I'll consider taking some profits off the table.
If the semiconductor sector as a whole continues to recover and active buying strengthens, I'll consider holding on.
I remain bearish on semiconductors over the long term, but bullish on a short-term oversold bounce.
It's just that trading in SOXL contracts is already too crowded now.
There are trapped investors at the highs, people in the middle who failed to buy the dip, and a large influx of leveraged funds at the lows looking to make a quick buck.
I think there will be opportunities for a rebound, but it will also keep running into selling pressure as people take profits. Without sustained new buying, it won't be easy to make a smooth recovery to $60 or $70.
I'm going long just to catch part of a rebound, not to bet on it re-entering a bull market.
Also, high trading volume doesn't mean everyone is bullish; it means lots of traders are repeatedly buying the dip, getting stopped out, and closing positions as they trade against one another.
That's exactly where SOXL is right now.
Everyone in the market thinks there's money to be made here, but the most interesting question is who will actually walk away with the profits.
For personal reflection only; this is not investment advice.