Bullish on China-based internet stocks? This ETF offers 3X leverage
Direxion Daily CSI China Internet Index Bull 2x Stock CWEB closed down 1.62% on Thursday in consolidation. Consolidation can be determined by looking at a stock’s volume, which in this case was below average.
CWEB reversed into an uptrend on May 25 and has been steadily rising since then.
The ETF is a double-leveraged fund that provides 2x daily exposure to companies whose core business is in the internet or internet-related industries. The ETF tracks a number of China-based internet companies across its four holdings, with the KraneShares CSI China Internet ETF and US Dollar accounting for 82.44% of its weighted holdings.
The other two funds making up the remainder of CWEB’s weightings are Goldman Sachs Trust Financial Square Treasury Instruments Fund Institutional, weighted at 10.48%, and Dreyfus Government Cash Management Funds Institutional, with a weighting of 7.08%.
It should be noted that leveraged ETFs are intended to be used as a trading vehicle as opposed to a long-term investment by experienced traders. Leveraged ETFs should never be used by an investor with a buy and hold strategy or by those with a low appetite for risk.
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The CWEB chart: CWEB formed its most recent downtrend high on June 27 at $80.09 and the most recent confirmed low was printed at $66.07 on June 22.
On Thursday, CWEB printed a hammer candlestick on the daily chart, which could indicate that the next low is on the horizon and the ETF will trade higher on Friday as it continues its uptrend.
- Thursday’s share price decline came on below-average volume, indicating consolidation. Bullish traders want to see lower prices on below average volume and higher prices on above average volume, indicating that the bull is in control.
- CWEB is trading slightly below the eight-day exponential moving average (EMA), but with an eight-day EMA trending above the 21-day, indicating indecision. Bullish traders will want to see CWEB regain the eight-day EMA over the next few days to prevent the indicator from breaking below the 21-day mark.
- CWEB has resistance above $80.09 and $97.90 and support below at $57.48 and $43.10.
See also: Alibaba and other Chinese stocks get jittery as China tightens rules on transferring data overseas
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