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 Indicator leaves overbought zone
The 10-day RSI Indicator for TECL moved out of overbought territory on May 21, 2025. This could be a sign that the stock is shifting from an upward trend to a downward trend. Traders may want to look at selling the stock or buying put options. Tickeron's A.I.dvisor looked at 38 instances where the indicator moved out of the overbought zone. In of the 38 cases the stock moved lower in the days that followed. This puts the odds of a move down at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Stochastic Oscillator entered the overbought zone. Expect a price pull-back in the foreseeable future.
The Moving Average Convergence Divergence Histogram (MACD) for TECL turned negative on May 29, 2025. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 48 similar instances when the indicator turned negative. In of the 48 cases the stock turned lower in the days that followed. This puts the odds of success at .
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 .
TECL broke above its upper Bollinger Band on May 12, 2025. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on June 03, 2025. You may want to consider a long position or call options on TECL as a result. In of 81 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
TECL moved above its 50-day moving average on May 07, 2025 date and that indicates a change from a downward trend to an upward trend.
The 10-day moving average for TECL crossed bullishly above the 50-day moving average on May 09, 2025. This indicates that the trend has shifted higher and could be considered a buy signal. In of 14 past instances when the 10-day crossed above the 50-day, the stock continued to move higher 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 354 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 310 cases where TECL Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
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