More Downside Ahead For The Brazil ETF [iShares MSCI Brazil Index (ETF), ProShares UltraShort MSCI Brazil Capped]

Share This Article
February 4, 2014 4:15pm NYSE:BZQ NYSE:EWZ

buyers and sellersMorpheus Trading: Tuesday’s action was the nail in the coffin for the current rally, forcing our market timing model into sell mode for the first time since last June. In sell mode, we want to avoid establishing new longs, as all major averages are operating well below


the 50-day MA and most have broken significant swing lows (an uptrend is no longer in place).

With logical short entries maybe one or two weeks away, it makes sense to list potential short setups all this week. First up this week is the ProShares UltraShort MSCI Brazil Capped (NYSEARCA:BZQ), which has reached a significant resistance level just above $100. A slight pullback off these levels within the next few weeks could produce an ideal long entry point in this inverted ETF.

$bzq base breakout

Looking at a chart of iShares MSCI Brazil Index (NYSEARCA:EWZ) below, we see that the price action is in a clear downtrend and appears headed for prior lows of 2008-2009 around $30. $EWZ has another 20% to 30% to selloff before hitting support, which means that $BZQ could double this amount since it is an UltraShort.

$EWZ downtrend

As with all inversely correlated “short ETFs,” it is important to be aware that this class of ETFs has a tendency to underperform the underlying index with longer holding periods. Therefore, this trade is best viewed a short-term momentum trade, rather than a position you would want to stick with for many months.

This article is brought to you courtesy of Morpheus Trading, LLC.


9 "MUST OWN" Growth Stocks For 2021

Read Next



Free Investing Ideas Newsletter!

Join over 70,000 investors who get the latest insights and top rated picks from our free investment newsletter.

Most Popular



5 WINNING Stock Chart Patterns

Explore More from ETFDailyNews.com

Free Investment Newsletter

Join over 70,000 investors who get the latest insights and top rated picks from our free investment newsletter.

ETFDailyNews.com respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories