Stock Picks – ProShares UltraShort MSCI Emerging Markets Fund-EEV

ProShares UltraShort MSCI Emerging Markets Fund (EEV) – This double inverse exchange-traded fund (ETF) seeks daily investment results that correspond to twice the inverse of the daily performance of the MSCI Emerging Markets Index.

This fund, which normally invests at least 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index, should be used only by traders as a bear market investment since its objective is to short stocks in emerging markets. 

On Feb. 2, at $11.85, I said, “Note that yesterday’s [Feb. 1] is now above both the 20- and 50-day moving averages — a bullish signal for this ETF, but a bearish signal for the emerging markets.

“As an ‘UltraShort,’ or double inverse fund, it is constructed to move at twice the inverse rate of the underlying investment. Therefore, it has greater risk than an ordinary ETF, so investors should use stop-loss orders when investing in it.

“The SEC has determined that ‘ultra funds’ are not good long-term investments, and that they are most appropriate for short-term trades.

“The initial trading target is $14, but it could go higher.”

On Feb. 5, EEV hit $13.88 but then succumbed to profit-taking. Since it has pulled back to below our original buy point, a new trade is suggested. Mt target remains $14.

Related Articles:

• 3 Emerging Market Bubbles Ready to Burst
• Tide Turning for Sprint?
• 5 Sectors to Avoid in 2010 

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