Time to Fade the Tech Rally? 3 Bear Market Funds for Friday
Seasonal strength in technology has sent stocks like Intel Corporation (INTC) and Oracle Corporation (ORCL) soaring. Over the past week, shares of INTC have gained more than 6%, while Oracle has climbed by well over 5%.
Traders are never more eager to buy markets when they have rallied to short term highs, as many technology stocks have in recent days. But the data and historical record of what happens to markets after they have strong short term moves higher suggests that traders interested in taking positions in technology may be rewarded by waiting for now-overdue pullbacks.
Another option for traders and active investors looking to take advantage of the growing volatility in this sector is through leveraged exchange-traded funds. As ETFs, these funds allow traders to access the technology sector as a whole, avoiding single stock risk. And as leveraged funds, these ETFs are designed to magnify the market’s moves, allowing traders to use less capital and take greater advantage of even the more modest reactions in the fund.
A few of the leveraged ETFs that traders might want to put on their watch lists are the Direxion Technology Bear 3x Shares (TYP), the ProShares Ultrashort Semiconductor ETF (SSG) and the ProShares UltraShort Technology ETF (REW). TYP is a 3x ETF, while SSG and REW are 2x – so traders and investors using these vehicles should use extra caution. But for active investors looking for a way to play the overextended rally in technology, funds like these may be an excellent short term option.
All three ETFs in today’s report were pulled from stock lists available through PowerRatings. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com