Market Overview

Same Old Leadership Song Lifts These Leveraged ETFs

Same Old Leadership Song Lifts These Leveraged ETFs

Given its status as home to a slew of cash-rich, mega-cap companies, it's not surprising that the technology sector is powering stocks off the March lows.

Dozens of exchange-traded funds are benefiting from tech leadership, products ranging from the normal to the exotic and everything in between.

What Happened

Of course, the Direxion Daily Technology Bull 3X Shares (NYSE: TECL) is enjoying tech's royal status. The geared fund is designed to deliver triple the daily returns of the Technology Select Sector Index.

That index is well-known for a simple reason: it allocates almost 42% of its combined weight to Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL), making TECL a leverage play on those two tech titans.

Why It's Important

“The rally is a familiar tune to anyone who’s paid attention to the last decade: once again, tech has led the way,” said Direxion in a recent note. “Technology-focused indexes like the S&P’s Technology Select Sector Index or the Dow Jones Internet Composite Index have surged roughly 30% from their recent lows over the past month.”

Traders looking for a leveraged bullish play on that internet index can consider the Direxion Daily Dow Jones Internet Bull 3X Shares (NYSE: WEBL). WEBL, which tries to deliver triple the daily returns of the aforementioned internet benchmark, is a geared play on the likes of Amazon (NASDAQ: AMZN), Facebook (NASDAQ: FB) and Netflix (NASDAQ: NFLX), among others.

WEBL has nearly tripled since mid-March “thanks in large part to increased interest in online software and streaming services that help close the distance people are being compelled to keep,” according to Direxion.

What's Next

TECL has taken in about $62.5 in new money this quarter, confirming investors' affinity for sturdy, cash-rich technology companies.

“The financial strength of these component companies seems likely to remain robust so long as their patrons in the tech field also remain in demand. But even the high-flying semis have been outshined in the last month by another area of tech,” said Direxion.

As for WEBL, traders' ongoing affinity for Amazon and seemingly all things e-commerce buoy the near-term case for this geared fund.

“However, despite the high relative performance of these stocks, a lot of the dominant performance in the segment can be traced back to large-cap tech,” notes Direxion. “Specifically, Amazon, which went from being at a 52-week low to a new all-time high in a matter of weeks, and Netflix which also made a new all-time high in April.”


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