The ongoing battle between growth and value did indeed take a turn in the latter’s favor over the past year amid rising inflation and rate hikes. With the capital markets looking at a potential recession, value took the top spot from growth, but as inflation levels off, growth could make a vaunted comeback.
One analyst sees just that scenario coming, but with a caveat: The impending growth rally could be met with a sudden halt.
Per a Kitco News report, Chris Vermeulen, chief market strategist and founder of TheTechnicalTraders.com, sees a trading opportunity that could build off strength in tech and a subsequent exit to the position. The strategy involves scooping up tech equities during a plateau in prices preceded by a strong run-up.
Tech stocks did just that at the height of the pandemic after they skyrocketed in a 2020 rally and then subsequently dropped in late 2021 while the sell-off accelerated in 2022. Now, the opportunity presents itself to catch tech on a short-term rally.
“I think we are just about to start this complacency rally in stocks,” said Vermeulen. “This is a great opportunity for potential trades that could last several weeks or several months, and growth stocks perform well during this. Now it might be the last chance to take advantage of them before we roll over… We’re going to enter a much bigger bear market.”
Going Long on Tech
A rally in tech could set up a play for the Direxion Daily Technology Bull 3X ETF (TECL). The fund also adds that extra element of profitability with its added leverage equal to three times the performance of the index it follows.
As such, with its triple leverage, TECL is certainly not for the weak of heart, but for the veteran investor or trader, it can be beneficial as a strategic tool. TECL specifically seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index.
The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements and securities of the index, 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 technology sector.
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