Castigated and vilified, leveraged ETFs are good something and
that something is rapid gains. Think about it. Prior to the debut
of these highly controversial products, traders in search of
double-digit returns in, say a few days or a week, were forced to
rely on the futures and options markets.
Those are still worthy avenues for those willing to embrace in
the name of large short-term gains, but leveraged ETFs add more
ammunition to traders' arsenals. Of course, there is a cautionary
tale here and it must be acknowledged. As ProShares and Direxion,
the two largest issuers of inverse and leveraged ETFs, make
perfectly clear on their Web sites, these are daily instruments,
not investments to be held for the long-term like shares of
Do NOT throw caution to wind with leveraged ETFs, but do
realize the current market environment is favorable to at least
taking a nibble at a leveraged product or two. Here are five with
the potential to offer double-digit gains by the end of next
ProShares UltraShort Oil & Gas (NYSE:
Following a gain of 6.1% on Wednesday, we admit we're not going
out on a limb by saying this ETF could jump another 10% over the
next seven trading days. The way things are setting up, there may
not be a better time to give DUG a whirl than right now.
Oil inventories remain high, U.S. demand remains slack and
that much was affirmed on Wednesday when the Energy Information
Administration said U.S. oil demand fell to a 15-year low in the
first quarter. Not to mention the charts of major oil stocks such
as Exxon Mobil (NYSE:
) and Chevron (NYSE:
) are getting worse by the day. Ten percent from current levels
takes DUG just over $31.
Direxion Daily Gold Miners Bull 3X Shares (NYSE:
This one is for the true believers and the real risk takers. With
those disclaimers in mind, it should be noted that traditional
long precious metals mining ETFs have been showing signs of life
recently. Even the downtrodden Market Vectors Gold Mining ETF
climbed higher on Wednesday while the broader was being drubbed.
We know NUGT can notch a double-digit gain in a week because in
the past week, the ETF is up 11.5%. A 10% move from here takes it
just north of $12. Note NUGT's bearish cousin is the Direxion
Daily Gold Miners Bear 3X Shares (NYSE:
PowerShares DB Crude Oil Double Short ETN (NYSE:
Many of the same sentiments that apply to DUG apply to the
PowerShares DB Crude Oil Double Short ETN as well. If West Texas
Intermediate futures, the U.S. benchmark, fall below $85 per
barrel, a return to $80 is likely and the violation of $85 could
hasten that move to $80. Even a move to $82-$83 could be enough
to spark DTO higher by 10% or more.
Direxion Daily India Bear 3X Shares (NYSE:
The Direxion Daily India Bear 3X Shares would really be
interesting to trade and observe if it even traded
100,000-200,000 shares per day. Those aren't particularly large
volume figures, but INDZ's ADV isn't even 16,000 shares.
What's important is that is that it's really just a matter of
days before the iPath MSCI India Index ETN (NYSE:
), the WisdomTree India Earnings ETF (NYSE:
) and other major India ETFs see new 52-week lows. If that helps
INDZ break resistance at $40, watch out because 10% could arrive
in just a day or two.
ProShares UltraShort MSCI Europe (NYSE:
The ProShares UltraShort MSCI Europe could actually be the
riskiest play on this list. All it would take to punish this ETF
severely would be on iota of somewhat decent news out of Greece
or Spain. Plus, asking for a 10% pop from Wednesday's close means
EPV has to climb to levels not seen since December 2011.
Then again this is Europe we're talking about and with no
legitimate reason to be bullish on the continent, EPV might be
the best Europe ETF out there right now. EPV just cleared its
200-day moving average around $45 and that would be a wise place
to put a stop-loss order.
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