Looking To Play A Volatility Increase Ahead Of The Fed's Rate Decision? This ETF Offers 1.5X Leverage

On Monday, the Convexity Daily 1.5x SPIKES Futures ETF (NYSE:SPKY) was falling under support near the $5 level Monday ahead of the Federal Reserve's monthly meeting.

SPKY is a 1.5x leveraged fund that follows the SPIKES Futures Short-Term Index, measuring volatility in broad-based equities similar to the ProShares Ultra VIX Short Term Futures ETF (UVXY), which tracks the S&P 500 VIX Short-Term Futures Index.

With SPKY seeking to move 1.5% for every 1% daily movement in the SPIKES Futures Short-Term Index, it is intended for short-term trades and not recommended for long-term holdings.

With the Fed meeting approaching and an announcement of another 0.25% rate hike widely anticipated Wednesday after a pause in June, volatility in the stock market could surge, potentially driving SPKY higher. Technically, SPKY appears poised for a short-term bounce in the coming days, as it has entered oversold territory on the daily chart.

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The SPKY Chart: SPKY has declined steadily over the last three trading days and on Monday, the ETF was working to print its third consecutive bearish Marubozu candlestick, which suggests lower prices could come again on Tuesday.

The moves lower have taken place on increasing volume, which also suggests lower prices are on the horizon. Additionally, the increasing volume suggests fear selling, which could accelerate the move down.
Eventually, the ETF will bounce because its relative strength index (RSI) is measuring in at about 28%. When a stock’s or ETF’s RSI reaches or falls under the 30% mark it becomes oversold, which can be a bounce indicator.
Traders who are bullish on volatility and bearish on the stock market want to see SPKY eventually form a bullish reversal candlestick, such as a doji or hammer candlestick, above $4.55, which could indicate a bounce is on the horizon and a new uptrend may form.
SPKY has resistance above at $4.97 and at $6.68 and support below at $4.55 and the psychologically important $4 mark.

Photo via Shutterstock.

UVXYProShares Ultra VIX Short Term Futures ETF

$35.72-0.05%

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