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Two Leveraged ETFs to Watch Out for in 2021

Ben Hernandez
·2 min read

This article was originally published on ETFTrends.com.

Traders looking for opportunities in 2021 may want to give industrials and real estate a look, which have both been affected by the pandemic in some form or fashion. In particular, they can play leveraged funds like the Direxion Daily Industrials Bull 3X Shares (DUSL) and the Direxion Daily MSCI Real Estate Bull 3X ETF (DRN).

A Direxion Investments article on market predictions for 2021 lays out the case for DUSL and DRN:

"Among the more specific market calls coming from this contingent are those from UBS’s Keith Parker and Jefferies strategist Sean Darby, both of whom single out industrial stocks and industries with exposure to consumer cyclicals, which stand to benefit from strong relative growth over their performance through 2021," the article said. "However, the two were split on other industries like utilities and materials, with Darby arguing that a cheaper U.S. dollar will support commodities and raise operating margins through 2021 while Parker predicts a stronger rotation toward growth, underweighting other value sectors like real estate and consumer staples."

"This bodes well for the Direxion Daily Industrials Bull 3X Shares (DUSL), which has seen strength in the waning days of 2020," the article added. "Meanwhile, if UBS’s call is to be believe, the Daily MSCI Real Estate Bear 3X Shares (DRN) could see stronger momentum as corporate and residential REITs struggle in the post-COVID economy."

Buying Opportunities Abound for DUSL, DRN

DUSL seeks daily investment results equal to 300% of the daily performance of the Industrials Select Sector Index. Per Morningstar's numbers, DUSL has a 3-month trailing return of over 40%.

DUSL is below overbought levels, which could signal a buying opportunity. When its relative strength indicator (RSI) is paired with the moving average convergence divergence (MACD) filter, the exponential moving average (EMA) line has crossed below the signal line, which can help to confirm a buying opportunity.

DUSL Chart
DUSL Chart

As for DRN, the fund seeks daily investment results equal to 300% of the daily performance of the MSCI US IMI Real Estate 25/50 Index. The index is designed to measure the performance of the large-, mid- and small-capitalization segments of the U.S. equity universe that are classified in the real estate sector as per the GICS.

Using Morningstar's trailing return numbers for the past 3 months, DRN is up over 20%. Like DUSL, its technicals are also signaling a buying chance.

In its 3-month chart, the RSI also shows DRN is below overbought levels for traders looking for an area of value to pounce. Likewise, the EMA on the MACD filter is below the signal line.

DRN Chart
DRN Chart

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