ProShares UltraShort FTSE/Xinhua China 25 (NYSE: FXP) — This ETF seeks daily investment results, before fees and expenses, that correspond to twice the inverse of the daily performance of the FTSE/Xinhua China 25 Index. The fund normally invests at least 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index.
FXP appears to have executed a saucer bottom. In late December, the 20-day moving average crossed above the 50-day moving average, which gave a trading buy signal for this inverse ETF, resulting in a gain of more than 30%.
On May 5, at $42, I said, “Now the stock has executed a breakaway gap through its 50-day moving average. This is a powerful buy signal with supporting volume and a trading target of $53.”
FXP ran to over $51 before falling to its current support, a double-bottom at $35. Downside volume is nil and the stochastic oversold.
Buy under $36.50 since a daily reversal would be a strong buy signal with a target of $43.
A word of caution: This ETF is for traders only. As an “ultra fund,” it is constructed to move at twice the inverse rate of the underlying investment. It carries greater risk than an ordinary ETF, so investors should use a stop-loss order. And finally, the SEC has determined that these funds are not good long-term investments and that they are most appropriate for short-term trades. The margin requirement for most leveraged ETFs is 100%.
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