Beyond FAANG: Fall Trading Opportunities

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As summer winds down, what sectors (other than technology) are interesting?
As of August 14, the S&P 500 is up almost 6% year-to-date with the tech-heavy NASDAQ up almost 14%. And the NYSE FANG Index is still up 27% on the year. No one is arguing that tech is about to go down, or that anyone should abandon FANG stocks. However, there are likely other sectors that have really been beaten down.

Now is a good time to take a look at those sectors and see whether Direxion’s leveraged ETFs can help put even more zip in your portfolio. Or if you don’t like the way the trend is going, Direxion will have the inverse ETF as well. We’ll look at four beaten-down sectors and with the right homework and tools from Direxion, you can cruise into fall with new ideas and ETFs. The beaten-down sectors we’ll examine are China, gold, energy, and biotechnology.

China has been a train wreck during this trade war
Wow. Just wow. Chinese markets are off 25% on average. It has been total carnage since trade tensions started with the United States. Tariffs are clearly hurting the country more that perhaps would have been imagined.

The question for the US government is one of contagion. Does the United States continue its war without having any consequences? The US market is still solid if not flashy. It’s really a tough call here, but there are a lot of Chinese stocks getting cheap out there. On the other hand, President Trump doesn’t seem like the type to let up on a pain trade. But who knows, maybe cooler heads will prevail.

Either way, Direxion has you covered with the YINN (Direxion Daily FTSE China Bull 3X Shares ETF ) and the YANG (Direxion Daily FTSE China Bear 3X Shares ETF) of the FTSE China 50 Index. Take a look at the triple-weighted Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL) versus YINN below (look at that divergence in mid-June).

Beyond FAANG: Fall Trading Opportunities

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Returns for performance under one year are cumulative, not annualized. For the most recent month-end performance please visit the funds website at direxioninvestments.com.

Energy is getting killed here at the end of the summer
After oil ran up in early July to over $75 per barrel, it has been heading straight down since then (below $65 as of the writing of this article). The turning point really appeared to be when OPEC said it would maybe pump more oil. But then data came out that it didn’t.

Finally, a week or so ago, we learned that oil producers had actually been seeing a drop in demand for the black gold—actually not a drop, but a reduced rise in demand. So, not only does it make sense that oil prices would drop, but it also makes sense that OPEC would not be producing more.

In the midst of all this, we had President Trump saying that Saudi Arabia had agreed to produce 2 million more barrels per day. We’re also at the end of the driving season in the United States, and the aforementioned China (which has slowed) consumes a lot of oil. Finally, the US dollar has been strong as well—not helping oil.

So, can these issues reverse themselves? Note in the chart below how energy was beating the market by 20%, but now is trailing by 10%—quite the 30% reversal. ERX (Direxion Daily Energy Bull 3X Shares ETF) and ERY (Direxion Daily Energy Bear 3X Shares ETF) can help you hedge or make the bounce-back bet, whichever you opt for.

Beyond FAANG: Fall Trading Opportunities