Bullish On The Homebuilding Sector? This 3X Bull ETF Tracks Home Depot, Lowe's

Direxion Daily Homebuilders & Supplies Bull 3X Shares NAIL was surging more than 12% higher on Wednesday in an attempt to reverse course from its most recent downtrend that began on Aug. 17.

NAIL is a triple-leveraged fund designed to outperform 52 U.S. companies in the home construction sector trading on the Dow Jones. The index includes a variety of companies such as home construction firms, interior furnishings, home improvement retailers, building material manufacturers and suppliers.

Some of the more familiar names in the ETF include Home Depot Inc HD, weighted at 4.7%; Lowe’s Companies, Inc LOW, weighted at 4.63% and Builders FirstSource, Inc. BLDR, which is weighted at 1.34% within the ETF.

It should be noted that leveraged ETFs are meant to be used as a trading vehicle as opposed to long-term investments.

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The NAIL Chart: NAIL has been trading in a downtrend between two parallel trendlines, which set the ETF into a falling channel pattern on the daily chart. On Wednesday, NAIL broke up from the upper descending trendline of the channel, which could indicate a larger reversal to the upside is in the cards.

• The ETF hasn’t yet negated its downtrend. For the downtrend to be negated, NAIL will either need to rise up above the most recent lower high of $26.87 or print a higher low above the $20.58 mark on the next retracement.
• If NAIL closes the trading day near its high-of-day price, the ETF will print a bullish Marubozu candlestick, which could indicate higher prices will come again on Thursday. If the ETF closes the session with a long upper wick, it could indicate a retracement is in the cards.
• When NAIL retraces lower, traders can watch to see if the ETF forms a bullish reversal candlestick, such as a doji or hammer candlestick, above the upper descending trendline of the channel. A back test of the trendline would be considered healthy because it would indicate the area has become support.
• NAIL has resistance above at $28.65  and $33.43 and support below at $21.60 and at the $20 mark.

There are a variety of tools a person can use for technical analysis, including Ninja Trader. Ninja offers advanced charting and other products as part of its trading suite that are designed to assist investors with navigating the markets. The platform allows its members to automate and execute trades and to test trading ideas through simulation. 

Photo: Jat306 via Shutterstock