Pros and Cons of Leveraged Technology XLK ETFs: TECL vs. TECS
Leveraged ETFs on the Technology Select Sector (XLK) offer amplified exposure to tech stocks without the need for a margin account. TECL (Direxion Daily Technology Bull 3× Shares) provides 3× long exposure, while TECS (Direxion Daily Technology Bear 3× Shares) delivers 3× inverse exposure. Below, we compare their key advantages and drawbacks to help you determine which may suit your trading strategy.
TECL: Direxion Daily Technology Bull 3× Shares
Metric TECL
Leverage +3× daily S&P Technology Select Sector Index
Expense Ratio (net) 0.85%
Assets Under Management $2.21 B
Avg. Daily Volume ~1.75 M shares
Pros
Amplified Upside Potential
In a strong tech rally, TECL aims to deliver 300% of XLK’s daily returns, enabling outsized gains on bullish days
No Margin Requirement
Provides 3× leverage without the complexities and risks of a margin account.
High Liquidity
With over $2 billion in AUM and daily volumes near 1.8 million shares, TECL typically has tight bid‑ask spreads for efficient execution
Cons
Compounding & Volatility Drag
Daily rebalancing means multi‑day returns can deviate significantly from 3× the index, especially in volatile markets
High Risk
Losses are magnified: a 1% drop in the underlying index can translate into a 3% loss in TECL.
Not for Buy‑and‑Hold
Designed for short‑term trading. Extended holds can lead to unexpected erosion of value.
TECS: Direxion Daily Technology Bear 3× Shares
Metric TECS
Leverage –3× daily S&P Technology Select Sector Index
Expense Ratio (net) 0.91%
Assets Under Management ~$94 M
Avg. Daily Volume ~0.9 M shares
Pros
Powerful Downside Hedge
TECS seeks –300% of XLK’s daily performance, making it a potent tool to profit from or protect against tech sell‑offs
Easy Short Exposure
Delivers inverse leverage without shorting via margin, reducing complexity and margin‑call risk.
Tactical Flexibility
Ideal for traders expecting a near‑term downturn in technology stocks.
Cons
Compounding & Tracking Risk
Like TECL, daily resets cause compounding effects; in choppy markets, TECS may underperform its –3× target over time
.
Expense Drag
A 0.91% fee can erode returns if bearish moves are muted or short‑lived.
Unsuitable for Long Holds
Holding through a tech rebound can produce large losses; intended for short‑term tactical use only.
Key Takeaways
Time Horizon Matters: Both TECL and TECS are built for daily trading horizons. Multi‑day or buy‑and‑hold strategies can suffer from volatility drag and compounding deviations.
Risk Management Is Crucial: Position sizing, stop losses, and strict entry/exit rules are essential to mitigate magnified losses.
Cost Considerations: Higher expense ratios (0.85%–0.91%) mean fees can significantly impact returns, especially in sideways markets.
Liquidity Profiles: TECL’s larger AUM and volume generally offer tighter spreads than TECS, though both are sufficiently liquid for most traders.
Conclusion
For traders with a bullish short‑term outlook on technology, TECL provides a high‑octane way to amplify gains. Conversely, those seeking to hedge or profit from downturns can turn to TECS. However, both funds carry significant risks—daily rebalancing effects, high volatility, and elevated fees—that demand disciplined risk management and frequent monitoring. Understanding these pros and cons is essential before incorporating leveraged tech ETFs into your trading arsenal.
TECL's RSI Oscillator recovers from oversold territory
The RSI Indicator for TECL moved out of oversold territory on April 09, 2025. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 23 similar instances when the indicator left oversold territory. In of the 23 cases the stock moved higher. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on April 25, 2025. You may want to consider a long position or call options on TECL as a result. In of 79 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for TECL just turned positive on April 15, 2025. Looking at past instances where TECL's MACD turned positive, the stock continued to rise in of 48 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where TECL advanced for three days, in of 359 cases, the price rose further within the following month. The odds of a continued upward trend are .
TECL may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Bearish Trend Analysis
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 4 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where TECL declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for TECL entered a downward trend on April 11, 2025. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
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