The Investing World Watches: What Will Tech Stocks Do? | ETF Trends

Technology is having a stellar year, and all traders have left to wonder is whether the momentum can carry through to next. An ETF to watch for the bullish at heart is the Direxion Daily Technology Bull 3X ETF (NYSEArca: TECL).

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.

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.

Taking a look at TECL’s year-to-date chart, the fund made a skateboard ramp up past the $400 mark in the fall before a perceived rotation to value took place just before the election. When you apply a relative strength index (RSI) filter to the chart, it looks like TECL might have some room left to run as the fund has yet to breach the overbought territory.

TECL Chart

Can Stimulus Keep Tech Going?

A key mover for TECL could be what the White House does and whether it can push through a stimulus package amid the COVID-19 pandemic. Some analysts are betting on more upside for big tech names through the end of 2020.

“The companies that we’ve been talking about for the last six months, they’re going to continue to be drivers for the next year or two here,” said Dave Nadig, chief investment officer and director of research at ETF Trends and ETF Database, during an “ETF Edge” interview on CNBC.

“There’s really no chance for any significant stimulus, … frankly, probably before February, and whether that stimulus is enough to do anything but maybe keep the consumer economy alive I think really remains to be seen,” Nadig said. “I don’t see a lot of real rosy things on the horizon until we have that broad distribution of a vaccine, and I think that’s much further out than people are really counting on.”

The markets can’t keep rallying around vaccine news. At some point, tangible efforts to roll out a tried-and-tested vaccine will need to come to fruition to keep the markets stimulated.

“What this year has shown us is a complete bifurcation between the digital economy and the physical economy,” said GraniteShares co-founder and CEO Will Rhind in the same interview. “One thing that we can be assured of is that there will have to be more stimulus at the government level.”

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