SPY Gaps Higher Ahead Of Retail Earnings But Looks Bearish Longer-Term: Why This 3X Leveraged Direxion ETF Could Pay

Zinger Key Points
  • SPXS is a triple leveraged fund that inversely tracks the movement of the SPY.
  • The bearish-on-the-market ETF is trading in an uptrend above the eight-day EMA.

The SPDR S&P 500 SPY gapped up 0.88% higher on Monday when the market ETF ran into a group of sellers who caused the SPY to fall from its high-of-day to trade up about 0.5%.

Whether or not the market will continue in its current downtrend or reverse course, remains to be seen. However, the current trend suggests the SPY is likely to trade lower, although a positive reaction to retail earnings this week could help the market turn bullish.

Costco, Target and Macy's are all set to print their financial results this week.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

More experienced traders who wish to play the SPY either bullishly or bearishly may choose to do so through one of two Direxion ETFs. Bullish traders can enter a short-term position in Direxion Daily S&P 500 Bull 3X Shares SPXL and bearish traders can trade the inverse ETF, Direxion Daily S&P 500 Bear 3X Shares SPXS.

The ETFs: SPXL and SPXS are triple leveraged funds that track the movement of the SPY, seeking a return of 300% or –300% on the return of the benchmark index over a single day.

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

The SPXS Chart: The inverse-to-the-market ETF, SPXS, is currently in a bullish uptrend, making a series of higher highs and higher lows. The most recent higher high was formed on Friday at $20.41 and the most recent confirmed higher low was printed at the $19.14 mark on Thursday.

If the SPY continues in its downtrend, the low-of-day on SPXS may become the next higher low within the downtrend, suggesting the Direxion ETF will trade higher on Tuesday. If that happens, bullish traders will want to see SPXS regain the 50-day simple moving average as support.

If SPXS closes the trading day flat or near the high-of-day, the ETF will print a doji or hammer candlestick, respectively, which could signal higher prices are in the cards for Tuesday. On Monday, SPXS tested the eight-day exponential moving average and held above the area, which is bullish for SPXS and bearish for the general market.

SPXS has resistance above at $20.92 and $22.01 and support below at $19.56 and $18.25.

Market News and Data brought to you by Benzinga APIs
Posted In: Long IdeasNewsShort IdeasTechnicalsTrading IdeasExpert Ideas
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!