The Hot List: 3 Tech Funds for Short Term Traders

  • November 10, 2011
  • TradingMarkets Editors

If it is true that the fall typically represents a seasonally strong period for technology, then traders and active investors looking for at least some exposure to the technology sector in general may want to add some of today’s technology-based exchange-traded funds to their watchlists.

With positive edges and two consecutive closes in oversold territory, the iShares Dow Jones U.S. Technology Sector Index Fund ETF (IYW) owes at least some of its current pullback to weakness in stocks like Apple (AAPL) and, to a lesser degree, IBM (IBM) and Microsoft Corporation (MSFT), that have experienced a pick-up in selling as of midweek.

IYW moved back into bull market territory in mid-October and has been trading back and forth above and below its 200-day moving average in the days since. The ETF’s current pullback represents the latest round of profit-taking as IYW retreats from its highest levels since late July.

Also closing in oversold territory for a second day in a row above the 200-day moving average ahead of trading on Friday were shares of the Technology Select Sector SPDRS ETF (XLK). Like IYW, XLK has a significant short term positive edge and is likely to attract buyers near current levels.

Traders looking for a leveraged way to take advantage of any continued weakness in the technology sector may want to consider the Direxion Technology Bull 3x Shares ETF (TYH). Leveraged three-to-one to Russell 1000 Technology Index, TYH is not as oversold as either the iShares Dow Jones U.S. Technology Sector Index Fund ETF or the Technology Select Sector SPDRS ETF. But if the weakenss in technology stocks persists and the edges in TYH continue to grow, the fund could be become a preferred vehicle for traders and active investors looking to make a bet that tech – seasonal strength or not – is not dead yet.

All of the exchange-traded funds (ETFs) in today’s report were available from research and data available through The Machine. To learn more, click here.

David Penn is Editor in Chief of TradingMarkets.com