To Consider During Market Turmoil: Direxion Daily Financial
What a year the banks have had. The bears have really gone into hibernation while the bulls have just pushed ahead and keep pushing the buy button. The pain for bears and many bearish funds led to Direxion, a leader in providing popular alternative investment solutions, including leveraged bear funds, to announce on March 1 that it was going to execute a reverse share split of its popular Daily Financial Bear 3x Shares ETF (NYSEARCA:FAZ). FAZ is a unique investment vehicle that seeks daily investment results, before fees and expenses, of 300 percent of the inverse of the performance of the Russell 1000 Financial Services Index.
Under normal circumstances, Daily Financial Bear 3x Shares ETF management creates short positions by investing at least 80 percent of its assets in financial instruments that, in combination, provide leveraged and unleveraged exposure to the index. This split continues a line of reverse splits in bearish and volatility funds in the past few months, as the five-year bull market continues to power higher with low volatility. But all of that seems like it’s coming to a halt, as the Dow is down 1,000 points in the last month. Technically, Daily Financial Bear 3x Shares ETF is setting up nicely for a trade. It can make you a lot of money in a short amount of time.
In late last year, shares of the Daily Financial Bear 3x Shares ETF entered into oversold territory and really haven’t gotten out of that rut until recently, when buyers stepped back in. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30. In the case of Daily Financial Bear 3x Shares, the RSI reading hit 29.1 in November, while the RSI reading for the S&P 500 was 69.