Should Traders Take a Look at Leveraged Tech?
With selling in technology stocks from Intel Corporation (INTC) to Hewlett-Packard (HPQ), it is little surprise to see technology funds in general – and leveraged technology ETFs in specific – among our highest rated markets ahead of trading on Wednesday.
Earning “consider buying” ratings of 9 out of 10 as of Tuesday’s close were both the ProShares Ultra Semiconductors ETF (USD) and the Direxion Daily Technology Bull 3x Shares (TYH). This means that both ETFs have pulled back to levels where buyers have tended come off the sidelines and bid shares higher in the short term.
USD comes to these levels as part of a five-day pullback that has put the fund in oversold territory for a second consecutive session. Tuesday also marked the second day in a row that USD had earned a 9 rating.
Note that the last time USD earned a rating of 9 was in early October, shortly before a rally during which USD closed higher for nine days in a row, gaining more than 37%.
While the ProShares Ultra Semiconductors ETF is built to track twice the daily performance of the Dow Jones U.S. Semiconductor Index, the Direxion Daily Technology Bull 3x Shares is designed to produce three times the daily return of the Russell 1000 Technology Index. And like USD, TYH has been under increasing selling pressure in recent days.
TYH has finished lower for five days in a row, six out of the last seven, earning a rating of 9 out of 10 ahead of Wednesday’s open. Also like USD, TYH has earned 9 ratings for two days in a row and was last rated this highly back in early October. Tuesday’s close marked TYH’s fourth straight, new, short-term closing low.
Traders with technology stocks and funds on their minds and watchlists should also keep an eye on the tech-heavy Nasdaq 100 index by way of funds like the ProShares Ultra QQQ ETF (QLD). Up fractionally on Tuesday, QLD had finished in oversold territory on Monday after pulling back for three days in a row.
All of the ETFs in today’s report were available from research and data available through PowerRatings. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com