ProShares Ultra Financials ETF (NYSE: UYG) — This exchange -traded fund (ETF) seeks daily investment results that correspond to twice the daily performance of the Dow Jones U.S. Financials Index.
On March 10, with the stock trading at $63, the Trade of the Day said, “Following a period of very high accumulation, this ETF appears to be breaking from a triangle with supporting evidence of the break coming from the crossing of the 50-day moving average by the 20-day moving average. If successful, the target for a trade in UYG is $72.50 to $75.
By mid-April, UYG hit $78, and we advised taking profits. By July, the stock had fallen to under $50. Since then, UYG has formed a strong double-bottom at $48 and is trading within a bull channel following a huge breakout in September.
UYG could be a leader in 2011 with a target of over $75. But it is at the top of its channel and could pull back to below $62, which is our buy point.
The SEC has determined that “ultra” funds are not good long-term investments and are most appropriate for short-term trades. Leveraged ETFs carry greater risk than ordinary ETFs, so traders should use stop-loss orders. Finally, the margin requirement for most leveraged ETFs is 100%, but check with your broker before entering an order.
If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.
