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.
Momentum Indicator for TECL turns negative, indicating new downward trend
TECL saw its Momentum Indicator move below the 0 level on March 28, 2025. This is an indication that the stock could be shifting in to a new downward move. Traders may want to consider selling the stock or exploring put options. Tickeron's A.I.dvisor looked at 82 similar instances where the indicator turned negative. In of the 82 cases, the stock moved further down in the following days. The odds of a decline are at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Moving Average Convergence Divergence Histogram (MACD) for TECL turned negative on April 03, 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 50 similar instances when the indicator turned negative. In of the 50 cases the stock turned lower in the days that followed. This puts the odds of success at .
The 50-day moving average for TECL moved below the 200-day moving average on March 07, 2025. This could be a long-term bearish signal for the stock as the stock shifts to an downward trend.
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.
Bullish Trend Analysis
The RSI Oscillator points to a transition from a downward trend to an upward trend -- in cases where TECL's RSI Oscillator exited the oversold zone, of 23 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Stochastic Oscillator suggests the stock price trend may be in a reversal from a downward trend to an upward trend. of 52 cases where TECL's Stochastic Oscillator exited the oversold zone resulted in an increase in price. Tickeron's analysis proposes that 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.
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