Fed Pushes Financial Sector Bear ETF to Potential Buy List

Stocks surged after the Federal Reserve assured traders interest rates will remain low for some time. Most of the Fed’s members believe short-term rates will remain unchanged for at least the next year and some see the possibility of near-zero interest rates until at least 2016. Financial stocks should be among the long-term winners when rates are low since they can borrow money at that rate and lend to customers at a higher rate. Not surprisingly, financials were among the biggest gainers after the Fed announcement.

When financial stocks rise, Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) falls. FAZ is a leveraged, inverse fund that tracks the sector. Yesterday, FAZ fell 6.19% and is now oversold with a ConnorsRSI reading of 17.63, a 2-period RSI of 7.93 and a PowerRatings of 8.


PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter these trades with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.

In the past, buying stocks with a rating of 8 on a 3% pullback the next day and selling five days later has been profitable 71% of the time. The average winner has gained 3.1%. Other entries and exits also show high winning percentages and large average gains.

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All data is as of the end of day on 12/18/2013.