Yesterday’s Pullback: Here’s How I Traded It
A quick update on yesterday’s market volatility. I want to share what I did yesterday and my view on how much longer this semiconductor rally can continue. Here’s the conclusion first:
I think this rally still has a little room left, but probably not much longer. Without a new catalyst, a top could form pretty quickly.
Yesterday I bought the dip in SanDisk and MAAS. I didn’t touch my positions in QCOM, NBIS, or INTC, and I added a bit more to LITE near my cost basis.
First, let’s look at the semiconductor sector’s performance over the past month and a half using SOXX, the semiconductor ETF, as an example. From the March 30 low to the May 11 high, it has already surged 73%.
Before going further, let me explain why I’m using this ETF to analyze the semiconductor rally:
Why not SOXL, since it gained even more? Around 368%. Or the more professional NYSE Semiconductor Index?
Personally, I hold SOXL because in a high-conviction rally like this, 3x leverage feels amazing. But if we’re analyzing the market objectively, SOXX is much more accurate.
If you look at SOXL’s holdings structure, you’ll notice it’s not as pure as SOXX. It contains a large amount of Treasuries and swap contracts used to create 3x leveraged exposure. In other words, the real semiconductor exposure is embedded inside swaps rather than directly reflected in stock holdings.
That’s why I prefer SOXX for analyzing the semiconductor sector. SOXX directly tracks the NYSE Semiconductor Index, and its holdings are much cleaner and more transparent. Current components include MU, AMD, Broadcom, Qualcomm, Nvidia, Marvell, Intel, and around 30 other stocks. Interestingly, it doesn’t include LITE or NBIS, and somehow not even SanDisk or WDC either.
So here’s the first takeaway:
SOXL may generate bigger gains in the short term, but it’s not suitable for long-term holding because of daily compounding decay. Over long periods, it tends to underperform SOXX.
Now back to the market itself.
From a purely technical perspective, each pullback cycle and each upward move has been getting shorter, but overall momentum still hasn’t shown meaningful deterioration.
Looking at the larger Fibonacci structure, the primary uptrend that started around 308 already looks very mature. The previous two pullbacks both held above the 0.236 Fibonacci retracement level, meaning the overall structure remained intact.
Last Thursday, the rebound began from the 488 low and rallied above 532 at the peak. Yesterday, due to headline pressure combined with heavy profit-taking, price briefly corrected toward the 0.786 retracement zone, but bulls quickly pushed it back near the 0.382 level. The bullish structure was never truly broken.
Right now price is consolidating around 515, sitting close to the previous high near 532, which has clearly become a resistance area. Whether the market can break through the 532 to 540 range will determine the next move:
- If price decisively breaks above 540 and holds, ideally with strong volume into the close, then the next major leg higher likely begins, with targets at prior extension levels or even higher. From a news perspective, Trump and executives from Nvidia, Apple, and Qualcomm visiting China recently could potentially provide another push.
- If price fails to hold above 532 to 540 and continues falling, eventually breaking below the 488 support level, then this rebound structure would genuinely be damaged and the trend could enter a much deeper correction.
Volume also supports this interpretation. Yesterday definitely saw substantial profit-taking, but during the earlier stages of the rally, volume never meaningfully declined, suggesting that bullish momentum is still alive.
So overall, I think the semiconductor rally can continue for a bit longer, but it’s already at relatively elevated levels.
As for my own positions, LITE, SanDisk, and NBIS aren’t strictly semiconductor stocks, but they’re still heavily influenced by the semiconductor sector, not to mention QCOM and INTC, which are direct components.
Putting technical analysis aside, since technicals aren’t really my strongest area, let’s talk about fundamentals.
The reason this semiconductor rally happened in the first place is because AI demand is expanding rapidly. The rise of Agentic AI is driving real growth in demand for memory, flash storage, GPUs, CPUs, and optical communication chips. This isn’t speculative demand. It’s real orders and real supply shortages.
More importantly, Agentic AI has stronger ROI potential than earlier generative AI models like ChatGPT, Gemini, or DeepSeek. Its commercialization and monetization capabilities are much more powerful.
That’s why, even though this rally looks crazy on the surface, companies with real demand, real orders, technological moats, and actual earnings growth still have strong fundamental support underneath them.
Stocks I’ve posted about before, like MAAS, QCOM, NBIS, and LITE, are examples. I’ve gone through their fundamentals, earnings, and valuations in detail. These companies have genuine technological advantages, real revenue growth, actual customer demand, and clear expansion trajectories.
Sure, they might fluctuate with the broader sector in the short term, but fundamentally they’re very different from the type of semiconductor stocks that collapse once the hype cycle ends because they have no earnings and are built entirely on expectations.
That’s also why I never trade purely speculative names.
What I want is durable, long-term compounded returns. So before building any position, I carefully analyze and value every single stock. Maybe I make a bit less money in the short run, but the goal is to stay in the game for the long term.