The chip comeback just hit a wall. Now the iShares Semiconductor ETF (SOXX) is having its worst day since July.
More important is where the reversal began. SOXX closed Monday at $559.12, less than a dollar from the 50% retracement of its June-to-July plunge — and almost directly on top of its 50-day moving average.
That convergence around $560 turned into a ceiling Tuesday, with SOXX falling more than 5% and breaking back below the 38.2% Fibonacci retracement level near $538.
That puts bears back in control of the short-term trade, even as semiconductors remain in a longer-term uptrend.
SOXX is not alone. Micron (MU) and Sandisk (SNDK) both pushed above the halfway marks of their own June-to-July collapses Monday, then fell back below them Tuesday as each dropped more than 5%. Nvidia (NVDA) has held up better and remains much closer to its 2026 highs.
Below $538, though, the chart opens the door to another leg lower. The next round-number target is $500.
That sets up a defined-risk way to play it.
The preferred trade is a Sept. 18 $540/$500 bear put spread. The trade buys one Sept. 18 $540 put and sells one Sept. 18 $500 put.
With SOXX trading near $530 Tuesday morning, the spread cost about $15.95, or $1,595 per spread.
The long $540 put gives the position downside exposure close to the current ETF price.
Buying the $540 put outright means paying for downside beyond the $500 target. Selling the Sept. 18 $500 put helps offset that cost.
The volatility setup helps too. Implied volatility on the $540 put was about 44%, compared with roughly 47% on the $500 put. In other words, the trade buys the lower-volatility option and sells the relatively richer downside contract.
The result is a position with a maximum loss of $1,595 and a maximum profit of $2,405.
The expiration breakeven is $524.05. If SOXX finishes at $500 or lower on Sept. 18, the spread reaches its full value and returns roughly 151% on the amount at risk.
The trade does not require another July-style collapse. It only needs the failed rebound to keep failing.
A move back above $538 would be the first sign that Tuesday’s breakdown is losing force. A reclaim of $560 would put SOXX back above the resistance zone it just rejected.
Above roughly $583, the bears should be heading for the exits.
Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com.
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