The technology sector, the largest sector allocation and best-petforming group in the S&P 500, remains beloved by investors this year. Exchange traded funds (ETFs) dedicated to technology have been luring investors thanks to seemingly relentless surges in share prices of technology titans, such as Apple Inc. (AAPL) and Alphabet Inc. (GOOG).
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Enthusiasm for technology ETFs has, predictably, made its way to the leveraged offerings tracking the group. That includes the Direxion Daily Technology Bull 3X Shares (TECL). TECL, perhaps the most popular leveraged technology ETF, looks to deliver triple the daily performance of the Technology Select Sector Index. Top holdings in the index include Apple (14.77 percent), Alphabet (10.77 percent), Microsoft Corporation (MSFT) (10.47 percent), and Facebook Inc (FB) (7.2 percent).
Like any leveraged ETF, TECL is best used on an intraday basis. TECL reminded traders off that fact Thursday when it lost nearly 6 percent, meaning traders that dared hold the ETF for multiple days either experienced some losses or saw a substantial chunk of their profits eroded in rapid fashion.
TECL's Thursday pullback was rare in terms of the ETF's recent performance. Coming into the Aug. 10th trading session, the ETF had traded higher in 71.4 percent of the preceding 30 days, averaging a gain of 1.6 percent on its up days, according to Direxion data.
TECL also found support at its 50-day moving average following Thursday's pullback, indicating the leveraged technology ETF could be poised to bounce back in the coming days.
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We note that the momentum indicators continue to signal a positive trend in the short-term. RSI is currently at 64.16, which is above the generally accepted uptrend technical level of 50. RSI above 50 is indicative of a trending price development, said Direxion.
Data suggest aggressive traders are comfortable wagering on more upside for tech stocks and that they are comfortable doing so with TECL. For the 30-day period ended Aug. 9th, TECL averaged daily inflows of just over $647,000.
In another sign of traders willingness to embrace leveraged technology ETFs, the Direxion Daily Semiconductor Bull 3X Shares (SOXL) averaged daily inflows of almost $887,000 over the same period. SOXL attempts to deliver triple the daily returns of the PHLX Semiconductor Sector Index and is a bet on stocks like NVIDIA Corp. (NVDA). That stock is 8.5 percent of the PHLX Semiconductor Sector Index.
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