It was certainly a day for the ages yesterday – as the Dow had one of the single worst days in history sparked by renewed coronavirus fears.
There must be something about the month of February. Here’s an important historical note that we all should consider…
Back in February of 2018, the Dow dropped more than 1,175 points on Monday – only to drop another 1,000 the following Thursday.
I bring this up because we could very well have a repeat downside performance as the week goes on. That precedent was set two years ago – and feels like it applies again today.
That’s why I recommended War Room members trade in and out of the ProShares UltraShort Dow30 ETF (NYSE: DXD) multiple times today.
I hinted at this in yesterday’s Trade of the Day, but I’ll expand on it a little more today…
The ProShares UltraShort Dow30 ETF moves at a rate of two times the inverse (negative 2X) of the daily performance of the Dow Jones Industrial Average.
Simply put, if the Dow moves down 3% on the day (like it did yesterday), the ProShares UltraShort Dow30 ETF moves up 6%.
So it’s a wonderful way to protect yourself against market selling pressure.
Why do I prefer the ProShares UltraShort Dow30 ETF?
Well for one, it’s cheap.
And the larger blue chip companies tend to have more global exposure, which makes them more susceptible to ongoing coronavirus fears.
United Airlines and Mastercard have already warned about upcoming losses due to the spreading virus. It’s reasonable to think that other major companies will be lining up with warnings as well.
After yesterday’s massive drop, the entire world is looking at standard price-to-earnings (P/E) ratios – and yet nobody has a clue about what the “E” will be.
With such a tremendous question mark for the future earnings of every global company, the market has currently found itself in a state of flux.
Action Plan: I find this to be such an important point – because the market hates uncertainty. And right now, nobody knows exactly how the coronavirus will impact their future earnings.
So as traders, we once again take on the “read and react” approach to the markets. We see the action – we track the sentiment – we position ourselves accordingly.
Members are holding the ProShares UltraShort Dow30 ETF for protection. In this market, playing both sides like this is critical for daily trading success, so join me in The War Room and let your trading journey begin!
About Bryan Bottarelli
Whether it was selling the Star Wars figures he collected as a little boy for 50 times their value or using the $125 he made cutting grass to buy a Michael Jordan rookie card that he later sold for $1,500, it was always clear that Bryan Bottarelli was a born trader – possessing the unique ability to identify opportunities and leverage his investments.
Graduating with a business degree from the highly rated Indiana University Kelley School of Business, Bryan got his first job out of college trading stock options on the floor of the Chicago Board Options Exchange (CBOE). There, he was mentored by one of the country’s top floor traders during the heart of the technology boom from 1999 to 2000 – trading in the crowded and lively Apple computer pit. Executing his trades in real time, Bryan learned to identify and implement some of his most powerful trading secrets… secrets that rarely find their way outside the CBOE to be used by individual traders.
Recognizing the true value of these methods, Bryan tapped into his entrepreneurial spirit and took a risk. He walked off the CBOE floor and launched his own independent trading research service called Bottarelli Research. From February 2006 to December 2018, Bryan gave his precise trading instructions to a small, elite group – most of whom have been followers ever since.
As a “play tactician,” Bryan uses his hands-on knowledge of floor trading to shape opportunities and chart formations into elegant, powerful and profitable recommendations. And by using the same hedging techniques taught by professional floor traders, Bryan is able to deliver his readers remarkable gain opportunities while strictly limiting their total risk.
Along the way, Bryan has developed a cumulative track record that could impress even the most successful hedge fund manager.
He now spends his days moderating one of the most elite trading research forums ever created: The War Room.
