Cloud computing was one of the darlings during the height of the pandemic in 2020. The air may finally be coming out of that balloon, highlighted by the weakness in this tech sub-sector as of late.

The ISE CTA Cloud Computing Index is down 17% in 2022 after rising 10% in 2021. The index started to falter around mid-November and subsequently fell 11% through the end of the year.

Bearish traders who were able to profit from that move were rewarded nicely. CLDS rose over 30% following the sector’s weakness.

As mentioned, cloud computing saw its strength multiply amid the start of the pandemic. Social distancing measures forced a heavier reliance on the internet, allowing companies to make the move to more online services.

As such, cloud computing saw its subsequent rise, as evident in the same ISE CTA Cloud Computing Index. The index rose 26% between April 1, 2020, through the middle of November 2021.

It’s difficult to fathom that this trend, or any trend, will persist. Cloud computing is still a prime growth option that many companies have still yet to capitalize on with respect to their core business operations.

In a world where “adapt or die” is even more relevant than ever with respect to technology, cloud computing should also prosper. However, until it starts showing signs of a comeback, bearish traders can play into the weakness.

^ISECTACC Chart

^ISECTACC data by YCharts

Profiting From Cloud Computing Bearishness

As bearishness permeates in the cloud computing space, one way to capture the downtrend and profit is the Daily Cloud Computing Bull and Bear 2X Shares ETFs (CLDS). The bearish sentiment in the industry is readily apparent, given that the fund is up about 45% on the year.

The fund seeks to achieve 200%, or 200% of the inverse, of the daily performance of the Indxx USA Cloud Computing Index. The index includes domestic companies that deliver cloud computing infrastructure.

CLDS Chart

CLDS data by YCharts

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