Timing tops and bottoms in any market sector is almost an impossible task for even the most astute investor. But for traders who want to play off their strong convictions, particularly in the downtrodden tech sector, leveraged exchange traded funds (ETFs) like the Direxion Daily Technology Bull 3X ETF (TECL) could be worth a look.
As the majority of investors in big tech know, the sector has seen better days. Not too long ago, big tech was dominating the stock market amid a heavy reliance on technology during the height of the COVID-19 pandemic.
Of course, what goes up must eventually come down, and big tech has been succumbing heavily to inflation fears in 2022. As such, the Nasdaq 100 is down over 30% with names like Apple and Amazon seeing major weakness.
An exodus from growth-oriented names is giving way to value-seeking. As talks of a recession continue to permeate through the capital markets, investors are heading into value-focused names that could thrive during an economic downturn.
“Technology stocks have been beaten down this year as investors abandoned high-growth companies with similarly high valuations,” a Motley Fool article succinctly explained. “This problem was compounded further by 40-year-high inflation, rising interest rates, and an arguably worsening recession. These factors have pushed the Nasdaq Composite into bear market territory, with the widely followed index down roughly 33% from its November high.”
What Goes Down Must Also Come Up
Eventually, the laws of market physics will play a part as the downward push of inflation fears starts to dissipate on the tech sector. This will give bullish traders an opportunity to take the other side, making funds like TECL worth a look if their instincts serve them correctly.
“As bad as things might seem at the moment, the good news is that the bear market will eventually give way to the next bull run,” the Motley Fool article added. “Until then, investors should be on the lookout for the sterling opportunities that such sell-offs create.”
With its triple leverage, TECL is certainly not for the weak of heart. The fund seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index.
TECL can give traders a tactical solution if they want to hedge out short positions. If the tech sector does eventually turn around, the added leverage provides that extra boost to enhance gains.
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