Fundamentals of Cloud Computing Make This ETF One to Watch

Cloud computing was one of the shining stars during the height of the pandemic, but although the technology sub-sector has seen weakness as of late, it should still provide tremendous growth opportunities for traders moving forward.

“As the world emerges from the pandemic, tech companies have been put in a tough spot,” a Barron’s article notes. “They’re under pressure to sustain pandemic-era boosts, and many of them have struggled to meet the challenge, including Zoom Video Communications, Peloton Interactive, Shopify, and Chegg. But there’s one pandemic trend that isn’t reversing: Cloud computing is here to stay. In fact, the cloud trend is gaining strength.”

The Direxion Daily Cloud Computing Bear 2X Shares (CLDL) is starting to show signs of strength as tech looks to make a comeback. The fund is up over 7% for the past month.

CLDL seeks 200% of the inverse (or opposite) of the daily performance of the Indxx USA Cloud Computing Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the fund’s net assets (plus borrowing for investment purposes).

Like all leveraged ETFs, these Direxion products are intended only for investors with an in-depth understanding of the risks associated with seeking leveraged investment results, and who plan to actively monitor and manage their positions. There is no guarantee that these funds will meet their objectives.

CLDL Chart

Further Weakness Ahead?

Taking the opposite direction on the trade, the Daily Cloud Computing Bull and Bear 2X Shares ETFs (CLDS) is still up over 20% for the year. With inflation hitting technology stocks in the gut, continued bearishness could bode well for bearish traders.

Since it takes the inverse approach of CLDL, the fund seeks to achieve 200%, or 200% of the inverse, of the daily performance of the Indxx USA Cloud Computing Index. If inflation can continue to cast a cloud over the tech sector, traders can play the volatility on the downside with CLDL.

CLDS Chart

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