Traders looking for a bounce back opportunity in technology after inflation sell-offs might be missing another opportunity in industrials. One fund to look at for leveraged gains is the Direxion Daily Industrials Bull 3X Shares (DUSL).
“Industrial stocks are breaking out as the strengthening economy draws capital away from large technology stocks like Apple and Amazon.com,” a TradeStation article said.
DUSL seeks daily investment results of 300% of the daily performance of the Industrials Select Sector Index. The fund, under normal circumstances, invests at least 80% of its net assets in financial instruments, such as swap agreements, securities of the index, and ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
The index includes domestic companies from the industrials sector, which includes aerospace and defense, industrial conglomerates, marine products, and more. Similar non-leveraged ETFs are already portending signs of strength for industrials.
“The SPDR Industrial ETF (XLI) set a new all-time closing high on Friday, while the SPDR Technology ETF (XLK) slid for a third straight week,” the TradeStation article said. “The divergence follows a new trend of investors shifting toward value stocks that can withstand higher interest rates. They’re also looking for companies that can benefit from faster gross domestic product.”
‘It’s a big change from recent history. Looking at the past decade, or 120 months, XLI underperformed the S&P 500 index 64 times (53 percent),” the article said further. “Meanwhile, XLK outperformed 80 times (67 percent), according to TradeStation data.”
The S&P 500 Industrials index is up 7% for the year, and almost 40% the past 12 months.
“The shift toward industrials began in November when positive vaccine news restored economic optimism,” the article continued. “It’s continued as China led a global rebound in January and U.S. growth recovered in February. That was highlighted by last week’s non-farm payrolls report, which crushed estimates as hotels and restaurants re-hired workers.”
Industrials Riding a Wave of Market Momentum
Right now, the industrials sector is riding a wave of momentum that could sustain itself as a global vaccine rollout continues. Strength can be confirmed using technical indicators like the relative strength index (RSI).
The RSI is registering a reading of 66.05 on DUSL’s one-year chart. This is just slightly below overbought levels. The 50-day moving average is 31% higher than the 200-day moving average.
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