the Trade-Radar + TradingStockAlerts blog

I know that it really isn't proper to do technical analysis on leveraged ETFs. I know that it is always better to analyze an underlying index. Nevertheless, I was struck by the fact that out of the 25 BUY signals on our Trend Busters list this weekend, fully 23 of them are inverse or inverse leveraged ETFs. In other words, they have all broken above downward-sloping trend lines and are threatening to initiate a new upward trend. Here they are listed below: Symbol Name DPK DIREXION DAILY DEVELOPED MARKETS BEAR 3X SHARES EDZ DIREXION DAILY EMERGING MARKETS BEAR 3X SHARES ERY DIREXION DAILY ENERGY BEAR 3X SHARES FAZ DIREXION DAILY FINANCIAL BEAR 3X SHARES DRV DIREXION DAILY REAL ESTATE BEAR 3X SHARES TYP DIREXION DAILY TECHNOLOGY BEAR 3X SHARES SEF PROSHARES SHORT FINANCIALS RWM PROSHARES SHORT RUSSELL2000 SBB PROSHARES SHORT SMALLCAP600 SPXU PROSHARES ULTRAPRO SHORT S&P 500 SMN PROSHARES ULTRASHORT BASIC MATERIALS...

As more brokerages prevent their customers (read: individual investors) from trading leveraged ETFs, I am moved to question the motivation of these firms. Thus far, we have UBS, Edward Jones, LPL Financial and Ameriprise Financial all banning trading of ETFs from ProShares and Direxion. Moreover, the Massachusetts chief financial regulator has announced an investigation of leveraged ETFs. Further stirring the pot, FINRA issued a warning that these ETFs are not suitable for investors who hold them for longer than one day. If they are held longer than a day they would only be appropriate if "closely monitored by a financial professional." The evidence against leveraged ETFs -- The beef against these ETFs is that you can get the call on a sector or index correct and still lose money. The examples used over and over again are the ProShares UltraShort Financial ETF (SKF) and the ProShares UltraShort Real Estate ETF (SRS). Despite the financial and real estate sectors taking a dive...

Markets are fluctuating and leveraged ETFs are gyrating. If you own any of these ETFs, have you examined your stop levels lately? Back in April I introduced the TradeRadar stop calculator . It emphasized the fact that leveraged ETF performance is driven by the action in an underlying index. It was pretty basic in that it translated movement in the underlying index into changes in the leveraged ETF but it required the user to determine the appropriate underlying index or ETF and to enter most recent prices as well as target stop levels. Major improvements -- I have now rectified some of the major weaknesses and made the calculator a lot easier to use. Here are some of the new features: All the ETFs from ProShares and Direxion are now listed in a drop down. Pick a leveraged ETF and the calculator automatically identifies the appropriate underlying index or ETF that is based on that index. The calculator retrieves the most recent prices for both the leveraged ETF and the underlying index...

Trading leveraged ETFs, ProShares or Direxion ETFs, for example, comes with a significant amount of risk, especially if the market begins moving against you. This is why advisers recommend using a stop loss order. Often referred to simply as a stop, it directs your brokerage to automatically sell a stock or ETF if it falls to a pre-determined level. This is intended to limit an investor's loss on an investment. There are essentially two kinds of stops: A hard stop that causes the stock to be sold if it hits a particular price. A trailing stop that causes a stock to be sold if it falls a particular percentage from the most recent high With leveraged ETFs it can sometimes be tricky setting stops. An investor must evaluate the underlying index and translate that evaluation into an appropriate stop for the leveraged ETF. This is necessary because the price action of the ETF is totally dependent on the performance of the underlying index. Some ETFs are leveraged 2X, such as the ProShare...