Direxion Daily Homebuilders & Supplies Bull 3X Shares (NYSE:NAIL) was spiking up almost 7% higher on Friday, in an attempt to reverse course from its most recent downtrend, which began on May 4.
NAIL is a triple leveraged fund that is designed to outperform 52 U.S. companies in the home construction sector that are trading on the Dow Jones. The index includes a variety of companies from home construction firms, interior furnishings to home improvement retailers, building material manufacturers and suppliers.
Some of the more familiar names in the ETF include Home Depot, Inc (NYSE:HD), weighted at 3.55%, Lowe’s Companies, Inc (NYSE:LOW), weighted at 3.29% and Builders FirstSource, Inc (NYSE:BLDR), which is weighted at 1.68% within the ETF.
It should be noted that leveraged ETFs are meant to be used as a trading vehicle as opposed to a long-term investment.
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The NAIL Chart: NAIL officially fell into a bear cycle at the end of February when the 50-day simple moving average (SMA) crossed below the 200-day SMA, which created a death cross to occur on the ETF’s chart. The ETF has been trading in a fairly consistent downtrend since reaching a new all-time high of $127.84 on Dec. 13, 2021, however, which was caused by a negative sentiment shift in the homebuilding and supply sector.
- NAIL’s most recent lower high in its downtrend was printed on May 10 at $39.85 and the most recent lower low was formed at the $30.01 level on Thursday. If the ETF is about to reverse course into an uptrend, traders and investors can watch for NAIL to print a higher low on its next retracement.
- Technical traders may have anticipated the rise higher would come on Friday because on Wednesday and Thursday, NAIL formed a bullish double bottom pattern near the $30 mark. The ETF has also seen increasing volume over the past few weeks, which indicated interest has been returning.
- Between about April 11 and Thursday, bullish divergence occurred on the NAIL chart, which also indicated the ETF was likely to trade higher. A bullish divergence occurs when a stock or ETF forms a series of lower lows while its relative strength index prints a series of higher lows.
- If NAIL closes the trading day near its high-of-day price, it will print a bullish kicker candlestick, which could indicate higher prices will come again on Monday. If the stock closes the trading session with a long upper wick, it could indicate the next lower high has been formed and the ETF will trade lower on Monday.
- NAIL has resistance above at $39.10 and $46.85 and support below at $28.65 and at the $21.60 level.
