The Market Could Be Volatile After Wednesday's Interest Rate Call: These Products Offer Upside Potential

Author: Melanie Schaffer | July 25, 2023 12:43pm

ConvexityShares Daily 1x SPIKES Futures ETF (NYSE:SPKX) was dropping about 1% Tuesday, falling to a new all-time low ahead of the Federal Reserve’s decision on interest rates.

SPKX is a fund, which tracks the SPIKES Futures Short-Term Index and measures volatility in broad-based equities similarly to ProShares Ultra VIX Short Term Futures ETF (NYSE:UVXY), which tracks the movement of the S&P 500 VIX Short-Term Futures Index.

Traders looking to potentially capture further gains on stock market volatility could choose to play ConvexityShares Daily 1.5x SPIKES Futures ETF (NYSE:SPKY). For every 1% daily movement in the SPIKES Futures Short-Term Index, the SPKY fund seeks to move 1.5%, meaning that it’s for short-term trades and should not be held for a long period of time.

Following the 2 p.m. ET meeting on Wednesday, when the Fed’s minutes are released, volatility in the stock market could increase, which could send SPKX higher. From a technical perspective, the ETF looks set for a short-term bounce over the coming days because it has entered oversold territory on the daily chart and has developed bullish divergence.

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The SPKX Chart: Although SPKX has been dropping steadily, the ETF’s relative strength index (RSI) has been increasing, which has caused bullish divergence to form on the chart. The rising RSI indicator suggests momentum is returning into the ETF and for the divergence to correct, the fund will either need to bounce or momentum will need to substantially fall.

• SPKX’s RSI is also trending in oversold territory, measuring in at about 28%. Although the RSI oscillator can remain extended for long periods of time, a reading under the 30% level indicates a bounce is likely on the horizon.
• If SPKX closes the trading day flat, the ETF will form a doji candlestick, which could indicate the local bottom has occurred and a bounce may take shape on Wednesday.
• If the ETF closes near the low-of-day, it will print a bearish Marubozu candlestick, which could indicate lower prices are on the horizon before the next bounce.
• SPKX has resistance above at $9.14 and at $9.64 and support below at the psychologically important areas of $8.50 and $8.

Read More: How to Read Candlestick Charts for Beginners

Posted In: SPKX SPKY UVXY