Direxion Daily Small Cap Bear 3X in OverSold Territory

Published on Monday, 06 February 2012 09:28 Written by Christian Paolinetti

New York, February 6th (TradersHuddle.com) - Shares of Direxion Daily Small Cap Bear 3X Shares (NYSE:TZA) closed the trading session at $18.34 well below calculated support at $20.70 placing the stock in oversold territory, as investors and money managers have been moving out of the stock

Direxion Daily Small Cap Bear 3X Shares (NYSE:TZA) seeks daily investment results of 300% of the inverse of the price performance of the Russell 2000 Index. The index measures the performance of the small-cap segment of the United States equity universe and consists of the smallest 2,000 companies in the Russell 3000 Index. It includes the smallest securities based on a combination of their market cap and current index membership. The Fund creates short positions by investing at least 80% of its net assets in financial instruments that, in combination, provide leveraged and unleveraged exposure to the Small Cap Index.

Direxion Daily Small Cap Bear 3X's stock was trading in a well defined range with support at $20.70 and resistance at $22.90, prior to its decline. It was evident how traders went out of the stock, when it broke calculated support sparking the current down draft.

From a technical perspective the Direxion Daily Small Cap Bear 3X stock is in severe pain, as the harsh sell-off could place a heavy burden of buyers wanting their money back, generating a price dynamic where buyers will become sellers when a bounce materializes. It can be expected that previous support becomes resistance, as a new range gets defined, therefore the maximum move for the stock should be calculated to return to previous support at $20.70. Traders wanting to establish a long position in Direxion Daily Small Cap Bear 3Xto play an oversold bounce should consider waiting for evidence of buying at a specified area to use it as a pivot placing stop losses.