Short Financials on a Bounce

by Sam Collins | November 15, 2010 12:01 am

Direxion Daily Financial Bear 3X Shares (NYSE: FAZ[1]) — This exchange-traded fund (ETF) seeks daily investment results, before fees and expenses, of 300% of the inverse of the Russell 1000 Financial Services Index. The fund normally creates short positions by investing at least 80% of net assets in financial instruments that, in combination, provide leveraged and unleveraged exposure to the index. 

A pop above FAZ’s 50-day moving average, now at $12.75, would signal a run to $14. But traders should not chase inverse funds. Instead, let them come to you. Exercise patience and try to buy FAZ on a market bounce that could cause it to fall to $11 or lower.

Leveraged ETFs seek to deliver multiples of the performance of a benchmark, while inverse ETFs seek to deliver the opposite of the performance of a benchmark. These ETFs entail unique risks, including, but not limited to: the use of leverage, aggressive and complex investment techniques, and the use of derivatives. Returns over longer periods will likely differ in amount and even direction of the underlying.

These products are not suitable for all investors. They require active monitoring and management. Stop-loss orders should be used to protect against losses.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net[2].

Source URL: https://investorplace.com/2010/11/short-financials-on-a-market-bounce/

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