Editor’s note: Any and all references to timeframes longer than one trading day are for purposes of market context only, and not recommendations of any holding timeframe. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don’t have the resources, time or inclination to constantly monitor and manage your positions, leveraged ETFs are not for you.
The Daily Homebuilders & Supplies Bull 3X Shares (NAIL) ETF hit new highs on December 2nd after breaking through resistance set in May. It just revisited those levels in November ─ a possible bullish sign for traders. In this installment of Direxion’s Xchange, we will examine NAIL’s bullish chart pattern and discuss possible trading options in the homebuilders and construction stock sectors.
Homebuilders Trade Brewing: Technically Speaking, There May Be a Double Doji Pattern Brewing
Source: Bloomberg Finance, L.P., as of December 8, 2021. The performance data quoted represents past performance. Past performance does not guarantee future results.
Is Another Upswing Building for Construction Stocks?
A candle chart is showing a pattern called doji. A doji candlestick can be representative of a trend shift given certain context, particularly an uptrend. Doji can be meaningful both as a single candle line and in groups.
By nature of a narrow real body that represents an open and close that are either the same or very close in price, doji candlesticks represent a balance of buyers and sellers and can be representative of slowing momentum.
This group of doji could be construed as interim lack of demand above the 120-level; indeed the fund has pulled back around 10% off its 12/10 highs after seeing that pattern but we also see the 20 Day Moving Average holding nicely as support through 12/15.
One way to interpret the $NAIL ETF’s price movements could be to construe this group of doji as market exhaustion, and a top to the recent run up, while potentially looking to take profits here if you’re positioned long.
Another way to interpret NAIL’s price changes would be to consider these doji have coincided with waning volume in NAIL. So rather than dealing with a fierce battle of Bulls and Bears that yielded equivalent influence on the ETF from both sides, we could be seeing traders take a breather while waiting out some consolidation before making a push to fresh highs.
Source: Bloomberg Finance, L.P., as of December 8, 2021.
A continued pattern of doji may exhaust the short-term trade opportunity – for now. So the key is to evaluate your position quickly, and monitor it daily. Know the risks before you trade Leveraged ETFs.
The Daily Homebuilders & Supplies Bull 3X Shares ETF (NAIL). NAIL seeks daily investment results, before fees and expenses, of 300% of the performance of the Dow Jones U.S. Select Home Construction Index. There is no guarantee the fund will meet its stated investment objectives.
Originally published by Direxion on December 20, 2021.
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The Dow Jones U.S. Select Home Construction Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Rafferty Asset Management, LLC (“Rafferty”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. Rafferty’s ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Dow Jones U.S. Select Home Construction Index.
The Direxion Shares ETFs are not designed to track their respective underlying indices over a period of time longer than one day.
Direxion Shares Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and include risks associated with the Fund concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause its price to fluctuate over time. Risks of the Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Market Risk, Market Disruption Risk, Aggressive Investment Techniques Risk, Counterparty Risk, Intra-Day Investment Risk, Daily Index Correlation/Tracking Risk, Other Investment Companies (including ETFs) Risk, and risks specific to the securities of the Homebuilding Industry, Consumer Good Sector, and Consumer Services Industry. The homebuilding industry includes home builders (including manufacturers of mobile and prefabricated homes), as well as producers, sellers and suppliers of building materials, furnishings and fixtures. Companies within the industry may be significantly affected by the national, regional and local real estate markets, changes in government spending, zoning laws, interest rates and commodity prices. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
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