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Leveraged ETFs are Smoking!

January 24, 2024

Just as a recap leveraged ETFs are ETFs which, if they are three times leveraged, should move, daily, by three times the ETF/ index they are tracking. But it gets better because of a phenomenon known as daily rebalancing. These ETFs are the ultimate momentum plays, continually being rebalanced around the best-performing stocks, creating another turbocharger for their performance.

This is a fabulous chart. Experts tell us that TECL is only suitable for trading and not appropriate for long-term investors but the chart tells a different story. Since this ETF was launched in 2008 it has climbed from $0.3 to $75.50, a rise of over 250 times. If you are a long-term investor what’s not to like?

TECL tracks the technology select sector index.

Two stocks, Microsoft and Apple, account for 43.65pc of the fund. Fortunately, they both have promising chart patterns as do charts for other stocks in the list. If the buy signal is as important as it looks, investors could have an exciting period ahead.

A problem with TECL is that you cannot buy the shares on IG. However, I have been alerted to another service called Trading 212, which may allow trading in these leveraged ETFs. I am checking it out although it is hard when you are firing questions at robots. I will have to try it out.

Another fund giving a buy signal on a 12m candlestick chart is my old favourite QQQ3 which you can buy on IG in a share account.

It is not a breakout but it is a classic golden cross buy signal. The chart is so long-term that I have to guess where an earlier signal might have been given, marked by a smiley on the chart. If I am right that one worked well.

Still on the theme of leveraged ETFs, SOXL, which tracks semiconductor shares, looks interesting. I have marked the chart with a smiley because the blue line (the shorter moving average) has turned higher. Given everything else that is going on that is good enough for me.

Yet again this chart looks as though it is building a consolidation, which will support a substantial rise. A simple way of thinking about charts like these is that you want to be in the chart while the m/a lines are rising and consider selling when they are falling. There is an element of 20:20 hindsight in reading these long-term charts but I hope to use Coppock to make it possible to understand better what is happening in real time and make effective decisions.

The obvious conclusion from what is happening now is that we face a period when the moving averages will be rising but there is a complication. If shares fell heavily for the rest of 2024 this imminent buy signal would disappear as though it had never been. We cannot be sure how this chart will look until 2024 has finished. Reassuringly we have a confirmed buy signal on a 6m candlestick chart.

Another important chart looking promising is Alphabet/ GOOGL.

I was showing somebody the charts I use and how I derive buy signals and he said – it is so easy. Well, it is and it isn’t. Look at this chart and it is obvious that GOOGL is poised for a big rise and the shares are a buy. I agree but how many people look at charts with 12m candlesticks? So many investors want to make money in minutes, not years and wouldn’t dream of using these charts.

In the past, I had people who came across my service and said they wanted to make money fast. I would say to them that can happen with what I do, often does in fact but it won’t happen with your mindset so please go and find another service more to your taste.

The trick for me is to try to make money slow and you may well make money fast but the real objective is to make money and the way to do that is to treat investment like a game of chess and focus on making the right moves. If you consistently, cooly and calmly, make the right moves, without emotion and with patient understanding of how markets work you should do very well.

The trick I need to learn is to follow my own advice!

Just for reference GOOGL remains a fantastic business and should never be underestimated. I have been reading the latest quarterly report, another is imminent, and it is all about innovation.

Today, more than 60pc of the world’s 1,000 largest companies are Google Cloud customers. At Cloud Next, we showcased amazing innovations across our entire portfolio of infrastructure, data and AI, workspace collaboration, and cybersecurity solutions. We offer advanced AI-optimized infrastructure to train and serve models at scale. And today, more than half of all funded Generative AI startups are Google Cloud customers. This includes AI21 Labs, Contextual, Elemental Cognition, Rytr, and more. We continue to provide the widest choice of accelerator options. Our A3 VMs powered by NVIDIA’s H100 GPU are generally available, and we are winning customers with Cloud TPU v5e, our most cost efficient and versatile accelerator to date. On top of our infrastructure, our Vertex AI platform helps customers build, deploy, and scale AI-powered applications.

Sundar Pichai, CEO, Alphabet, Q3 2023, 25 October 2023

The scale of GOOGL’s operations is incredible.

AI is helping advertisers find as many people as possible in their ideal audience for the lowest possible price. Early tests are delivering 54pc more reach at 42pc lower cost. And then with video view campaigns, AI is serving skippable ads across in-stream, in-feed, and shorts and helping advertisers earn the maximum number of views at the lowest possible cost. So far, they’re driving 40pc more views on average versus in-stream alone. Then for YouTube and other feed-based services, there’s our new Demand Gen campaign, which launched in April, rolled out worldwide last week, and was designed for the needs of today’s social marketers to engage people as they stream, scroll and connect. It combines video and image ads in one campaign with access to 3bn users across YouTube and Google, and the ability to optimize and measure across the funnel using Google AI.

Philipp Schindler, Chief Business Officer, Alphabet, Q3 2023, 25 October 2023

Classic Breakout for Lam Research

What is the most obvious characteristic of this chart of Lam Research Corporation? It is strong, clearly a share in a powerful uptrend. Since 1984, 40 years ago, the shares have climbed from less than $2 to over $850 and look as though they are heading a great deal higher.

Lam is strongly placed as demand ramps up for semiconductors.

New etch and deposition capabilities are needed, and the trends are favorable for Lam. Due to our existing strength in back-end processes, we have been able to quickly extend the capabilities of our copper electroplating and PVD [physical vapour deposition] deposition products to address the throughput and productivity requirements of backside power applications. We now have tool-of-record positions at a leading foundry logic customer and expect these positions to continue to grow. As we approach the end of the year, our installed base is closing in on 90,000 chambers*.

As semiconductor manufacturing is becoming increasingly complex, our customer support business group is seeing more opportunities to deliver innovation, productivity, and yield enhancement. In the September quarter, we expanded our equipment intelligence offering at multiple customers to include the first big data application of high-resolution optical emission spectroscopy, or OES. The equipment intelligence capabilities we are delivering with OES are highly differentiated due to the complexity of collecting and interpreting plasma spectra in manufacturing over time and across a large fleet of tools. Our solution allows customers to resolve performance issues that would otherwise remain undetected.

Recently, our CSBG team also put the industry’s first collaborative maintenance robot, or cobot, into a production fab and a leading customer. Cobots helped execute complex maintenance tasks with precision and reliability, leading to improved tool-to-tool performance matching and higher equipment availability. Also, we believe cobots as a new service offering can play an important role in addressing anticipated skilled labor shortages as semiconductor manufacturing expands and becomes more regionalized. Overall, we see tremendous vectors of growth ahead for the semiconductor industry and for Lam.

Tim Archer, CEO, Lam Research Corporation, Q3 2023, 18 October 2023.

Lam Research is an interesting share to alert because their results are due after the market closes today, which could trigger some volatility. I never worry too much about that. The long-term picture looks strongly positive. One analysis recently had this to say.

  • LRCX’s market position in the semiconductor supply chain is like selling shovels in a gold rush.
  • The company’s sales are closely tied to the growing global semiconductor capex.
  • The current market slowdown is temporary, caused by high inventories subsequent to a period of rapid capacity growth. The supply/demand balance is expected to recalibrate as early as 2024.
Seeking Alpha, 24 November 2023

*Environmental chambers are utilized in the electronics industry to test various types of components such as ICs, circuit boards, semi-conductors,sensors, transducers, storage drives, power supplies, surge protectors, touch panels, fuses, capacitors & resistors, switches/connectors, electronic assemblies and more.

Cincinnati Sub-Zero

Strategy – Take Advantage of Buy Signals

In a recent alert, I talked about key resistance levels. We have just seen the rapid run-up in Nvidia shares when they broke through $500. Now NDXT is breaking up through 10,000, which could produce more fireworks.

Share Recommendations

Direxion Technology 3x Daily Leveraged. TECL. Buy @ $78.88

Wisdomtree Nasdaq 100 3x Daily Leveraged. QQQ3. Buy @ $172.50

Direxion Daily Semiconductor Bull 3x Daily Leveraged. SOXL. Buy @ $38.5

Alphabet. GOOGL. Buy @ $149

Lam Research Corporation. LRCX. Buy @ $856

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