Direxion 3x Financial Bear ETF
First up this week is the Direxion 3x Bear ETF (FAZ), an exchange-traded fund that's designed to deliver three times the inverse performance of the Russell 1000 Financial Services Index. In other words, when financial stocks are hurting, FAZ is rallying hard. It's not surprising then, that this stock is breaking out right now.
Shares of FAZ broke out above $45 resistance on Thursday, with confirmation in Friday's weak session. That breakout is the buy signal for this ETF -- and a sign that banks will likely be moving lower in the near-term. The closest resistance level for FAZ right now is just shy of $52; that price makes for a solid upside target. If FAZ can surmount the excess of supply of shares above that price, there's considerable upside in this trade.
One thing to keep in mind with FAZ, as with any leveraged ETF, is the fact that this fund exhibits considerable tracking error over the long-term. So while the Russell 1000 Financial Services Index has fallen 20.3% year-to-date, this fund is only up 5.6%. As a trade, this ETF makes sense -- as a secular bet against financials, there are better alternatives.