Stock Picks – ProShares Ultra Financials-UYG

ProShares Ultra Financials (UYG) – This exchange-traded fund (ETF) seeks daily investment results that correspond to twice the daily performance of the Dow Jones U.S. Financials Index.   

UYG traded for six months within the confines of a rectangle bounded by support at $5 and resistance at $6.30.

Following a period of very high accumulation, this ETF appears to be breaking from a triangle with supporting evidence of the break coming from the crossing of the 50-day moving average by the 20-day moving average. If successful, the target for a trade in UYG is $7.25 to $7.50. 

But this is a high-risk trade with a lack of support from the internal indicators like the stochastic. 

Also, this “ultra fund” carries greater risk than an ordinary ETF, so investors should use stop-loss orders.

And this play is “for traders only,” as the SEC has determined that ultra funds are not good long-term investments and that they are most appropriate for short-term trades. The margin requirement for most leveraged ETFs is 100%, but check with your broker before entering an order.

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