Looking To Play Potential Volatility Heading Into The Fed's Decision On Interest Rates? This Fund Offers 1.5X Leverage

Author: Melanie Schaffer | July 26, 2023 11:34am

ConvexityShares Daily 1.5x SPIKES Futures ETF (NYSE:SPKY) was trading flat Wednesday, hovering just under the $5 mark –an area that has been acting as resistance ahead of the Federal Reserve's decision on whether to hike interest rates.

SPKY is a 1.5x leveraged fund, which tracks the SPIKES Futures Short-Term Index and measures volatility in broad-based equities in a similar way to ProShares Ultra VIX Short Term Futures ETF (NYSE:UVXY), which tracks the movement of the S&P 500 VIX Short-Term Futures Index.

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.

The Federal Reserve is set to release its decision on interest rates at 2 p.m. ET, when the central bank is largely expected to announce another 0.25% rate hike after pausing its campaign in June.

When the decision is applied, volatility in the stock market could increase, which could send SPKY higher. From a technical perspective, SPKY looks set for a short-term bounce over the coming days because the ETF is trading in oversold territory on the daily chart.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The SPKY Chart: SPKY may have negated its downtrend on Tuesday by printing a higher low above the July 19 low of $4.55. For a new uptrend to confirm, SPKY will need to bounce up to form a higher high above the $5.22 mark.

The downside pressure has caused SPKY’s relative strength index to fall under the 30% mark, which puts the ETF into oversold territory. Eventually, a bounce is likely to come, which would help to drive the ETF’s RSI back into neutral territory, although it should be noted that RSI levels can remain extended for long periods.
If SPKY closes Wednesday’s session with a lower wick, the ETF will print its second consecutive hammer candlestick, which suggests it may bounce. If the stock market reacts positively to the Fed’s decision, however, the ETF will be in danger of dropping to new lows, which would set SPKY into another downtrend.
SPKY has resistance above at $4.97 and at $6.68 and below at $4.55 and at the psychologically important $4 mark.