Energy was the top performing sector in January, but one potential play traders may want to consider is industrials. More specifically, the Direxion Daily Industrials Bull 3X Shares (DUSL) could present short-term opportunities to capitalize on as the sector exhibits upside.
The fund tracks the Industrials Select Sector Index (IXITR), which targets domestic companies in the industrials sector. The Index covers a wide swath of sub-industries: aerospace and defense; industrial conglomerates; marine; transportation infrastructure; machinery; road and rail; air freight and logistics; commercial services and supplies; professional services; electrical equipment; construction and engineering; trading companies and distributors; airlines; and building products.
Industrials were the third-best-performing sector in January, and DUSL provides 3x the sector exposure. As such, high-conviction traders can use the fund to amplify their profit potential.
A New Industrial Revolution
In the DUSL fund, traders will see some heavy hitters of the American industrial sector. That includes Caterpillar, Union Pacific, and General Electric. These companies stand to benefit from the current artificial intelligence (AI) build-out, which has been dubbed a new industrial revolution.
While leading much of the market gains over the last few years, the tech sector has shown signs of faltering, as investors question whether lofty valuations align with fundamentals. Nonetheless, the AI trend has structural resilience. This makes the industrial sector an alternative opportunity to capitalize on the upside despite current tech-sector weakness.
“Corporates are divesting legacy or non-core operations and reallocating capital towards higher-growth, technology-enabled, and service-oriented businesses aligned with digitalisation, the energy transition, and the build-out of AI infrastructure,” Price Waterhouse Coopers said, adding that this confluence of events is creating greater global mergers and acquisitions in the industrial sector.
Reshoring and A&D Growth
Other catalysts for the industrial sector include the reshoring boom and strength in the aerospace & defense (A&D) sector. Government incentives for domestic semiconductor plants and EV battery factories are driving a surge in factory construction. This should positively impact the industrial giants found within the DUSL ETF.
Ongoing geopolitical tensions remain a market factor in 2026. As such, global governments are keen to spend more heavily on defense, which is a net positive for the A&D sector.
Furthermore, if any short-term events, such as a positive manufacturing report or a surprise infrastructure announcement, occur, DUSL allows traders to capitalize on potential upside. This makes DUSL an ideal tool to capture short-term alpha with 3x exposure.
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