Sam Collins

Profit from Financial Flop with Financial Bear 3X ETF

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Direxion Financial Bear 3X Shares (FAZ) -- This highly leveraged Exchange-Traded Fund (ETF) seeks to replicate, net of expenses, 300% of the inverse daily performance of the Russell 1000 Financial Services Index.

On March 23, about FAZ I said, "Despite being somewhat short on data, the fund appears capable of a bounce to $60-plus if the financial sector is hit hard again this week after a rally in anticipation of the Treasury Department's new plan."

Investors who went in at the market were hit hard since it opened that day at $26.94 and closed at $19.20. I hope that they took our advice, "As with all speculative, high-risk ETFs, stops should always be entered in order to protect against a large loss, and placing limit orders under the market is a wise method, too."

Now, with a sell-off of the group, there is a strong possibility that it may be time for the aggressive trader to go after FAZ. A 33.3% Fibonacci retracement of its high-to-low number equals $45, and a 50% retracement would take it to $60.

But don't be too aggressive about establishing positions, and be sure to enter stops -- this is a speculative, high-risk trade.

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Sam Collins is a registered, fee-based portfolio manager who may be contacted samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.