Market Overview

Robotics Rebound Carries This ETF

Robotics Rebound Carries This ETF

Robotics stocks and exchange traded funds were all the rage in 2017, only to be drubbed over the course of 2018.

The group is rebounding this year as highlighted by a year-to-date gain of just over 19 percent for the Indxx Global Robotics and Artificial Intelligence Thematic Index (IBOTZNT), one of the most widely followed gauges of robotics equities.

What Happened

Rebounding robotics stocks are boosting the fortunes of the Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (NYSE: UBOT), the only leveraged ETF currently dedicated to this industry.

UBOT attempts to deliver triple the daily returns of the Indxx Global Robotics and Artificial Intelligence Thematic Index.

That index “is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence, including companies involved in developing industrial robots and production systems, automated inventory management, unmanned vehicles, voice/image/text recognition, and medical robots or robotic instruments,” according to Direxion.

Why It's Important

Like any other leveraged ETF, UBOT should be employed as a short-term trade, particularly because robotics stocks are more volatile than some other sectors and broader equity benchmarks. The Indxx Global Robotics and Artificial Intelligence Thematic Index has a standard deviation of 21.90 percent, more than double that of the S&P 500.

Even with its recent ascent, UBOT is seeing increased activity. On Friday, volume in the leveraged robotics ETF was more than double the daily average and that follows a five-day run where UBOT's daily volume was more than 102 percent above the trailing 20-day average, according to Direxion data. That was the largest volume increase among all Direxion leveraged ETFs during that period.

What's Next

The Indxx Global Robotics and Artificial Intelligence Thematic Index resides about 21.40 percent below its 52-week high and 4.55 percent below its 200-day moving average, so there is potential for UBOT to deliver more near-term upside, but traders should remember not to hold this leveraged ETF for extended time frames.

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