JPMorgan, Citigroup, and Wells Fargo kicked off bank earnings season on Friday, reporting first-quarter results.
Sylvia Jablonski, Managing Director of Capital Markets and Institutional ETF Strategist for Direxion, said the earnings reports seemed to keep traders happy at the open on Friday.
“We often see traders expressing their view on earnings via purchases in either a three beta bull or bear fund, in the case of financials, we have the Direxion Daily Financial Bull 3X ETF (FAS) and the Direxion Daily Financial Bear 3X ETF (FAZ),” Jablonski said. “For sophisticated traders with risk appetite looking to generate short term alpha on earnings conviction, Direxion tools are a great resource. We saw traded volume in our financials bull fund nearly double prior to earnings.”
In recent weeks, Jablonski noted markets have seen volume come back into nearly all of the S&P sectors and major indices.
“This earnings season has been much anticipated and so far, hasn’t disappointed with strong financial earnings this morning,” she said.
Traders can express a short term bull or bear view using FAS or FAZ – or Direxion’s bull and bear regional banks ETFs: the Direxion Daily Regional Banks Bull 3x ETF (DPST) and the Direxion Daily Regional Banks Bear 3x ETF (WRDW).
“As a reminder these products are meant to be actively monitored and traded, particularly in volatile markets,” Jablonski said.
Looking beyond financials, Jablonski said an interesting opportunity may come from short-term opportunities in oil and gas.
“Crude is back to mid 60 levels off of China trade war tension ease, OPEC cuts are holding steady, and single name stocks in gas related companies like Exxon, ConocoPhillips, Chevron are increasing dividends and either buy backs or returns for longer term investments,” she said. “In general, investors have been under weight this sector, and while we have volume back in the market, treasury yields fallen, and besides gold, this may be an untapped area of the market to look at.”
She said Direxion has seen some positive momentum in its 3x Daily S&P Oil and Gas Direxion Daily (GUSH), Direxion Daily Nat Gas 3x ETF (GASL), and 3x Direxion Daily Energy (ERX).
“Performance of those funds month to date has been near or above 20% in all cases,” she said. “The sector has been on a short-term run.”
Finally, Jablonski said investors should take note of healthcare and biotech.
“We’ve heard positive news around R&D and successful progress in that space from companies like Loxo, Illumina, Bayer, looking to partner and commercialize drugs for various cancers, next generation gene sequencing,” she said. “You’ve had a lot of big news and potential moves in healthcare with CVS and Aetna potentially merging, UNH significant improvements to UNH health care plans, positive ratings, increased revenue streams.”
The sector has been interesting for traders seeking short-term exposure via Direxion’s three ETFs in the space: Direxion Daily Healthcare Bull 3X ETF (CURE), Direxion Daily Pharmaceutical & Medical Bull 3x Shares ETF (PILL) and Direxion Daily S&P Biotech Bull 3X Shares (LABU).
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