When markets are making one-way moves to the upside, some of the biggest edges for high probability short-term traders can be found in leveraged and inverse leveraged exchange-traded
funds that have become extremely overbought or oversold.
Today, I’d like to bring to the attention of traders who may be considering leveraged ETFs for short term trades a set of ETFs from Direxion Funds, which has been among the pioneers in creating these funds. These leveraged and inverse leveraged, 2x and 3x ETFs expand opportunities for short term traders to take advantage of overbought and oversold conditions in a number of markets, from sectors in the United States to emerging markets like China and in Latin America.
Note that many of these ETFs are relatively new, and are not as liquid as many other widely-traded leveraged funds like the ^FAS^ or the ^TNA^.
Here are 7 ETFs (leveraged/inverse leveraged pairs) You Need to Know
^CZM^ / ^CZI^
^DZK^ (below) / ^DPK^
^SOXL^ / ^SOXS^
^EDC^ (below) / ^EDZ^
^BRIL^ / ^BRIS^
^LBJ^ / ^LHB^ (below)
^INDL^ / ^INDZ^
Given the continued buying pressure, most of the underlying markets for these leveraged and inverse leveraged ETFs, the inverse versions of these funds have become exceptionally oversold in most instances. Continued oversold extremes, based on our historical research into ETF trading behavior going back more than a decade, are not sustainable in the short-term and high probability traders should be alert to the potential for short term reversal.
Learn how to trade leveraged and non-leveraged exchange-traded funds using objective, quantified trading strategies. The TradingMarkets High Probability ETF Trading Seminar, led by Larry Connors, founder and CEO of TradingMarkets, will provide short term traders with the insight, skills and resources they need to trade ETFs successfully in markets that are rising, markets that are falling and markets that are moving side to side.
The TradingMarkets High Probability ETF Trading Seminar is a special, one-day event coming this October. To find out more and to reserve your spot, click here today.
David Penn is Editor in Chief at TradingMarkets.com.