Two US ETF Under Radar – BULZ and ERY

Overview

This week’s report covers MicroSectors FANG & Innovation 3x Leveraged ETN (NYSE: BULZ) and Direxion Daily Energy Bear 2X ETF (NYSE: ERY), which are directional leveraged exchange-traded products (ETPs) that use financial derivatives and debt to amplify the returns of an underlying index, typically by 2x or 3x. These products are designed to provide magnified exposure to the price movements of a specific asset class—either in the direction of rising (bullish) markets, as in BULZ, or falling (bearish) markets, as in ERY.

Section 1: MicroSectors FANG & Innovation 3x Leveraged ETN (NYSE: BULZ)

The Fund seeks daily investment results, before fees and expenses, of three times (300%) the daily performance of the Solactive FANG Innovation Index. This index is composed of highly liquid, large-cap growth companies across sectors such as technology, communication services, and consumer discretionary, often including firms associated with innovation and disruptive trends.

As a leveraged ETN, BULZ typically gains exposure through swap agreements and other derivative instruments with financial institutions, rather than directly holding the underlying securities. These agreements can vary in duration from short-term to longer-term contracts depending on market conditions and fund strategy.

Its performance over extended periods diverges from the expected 300% multiple due to the compounding effect of daily returns. This divergence is especially pronounced in volatile markets, where price swings can erode returns even if the underlying index trends upward over time. The combination of leverage and compounding makes BULZ particularly sensitive to volatility drag. As a result, this ETN is generally intended for short-term tactical trading rather than long-term investment holding.

Section 2: Technical Analysis on ETN and Underlying Asset

NYSE: BULZ

MicroSectors FANG & Innovation 3x Leveraged ETN (BULZ) is currently trading near a descending trendline support, indicating the possibility of a short-term bounce. The 14-period RSI is exhibiting divergence relative to price action, suggesting that recent selling pressure may be losing momentum and could moderate in the near term, thereby supporting a potential recovery. However, the instrument continues to trade below its 20- and 50-period Simple Moving Averages, which are likely to serve as immediate resistance zones and may limit any sharp upward movement. Overall, while the broader trend remains subdued, the current technical structure toward a potential short-term bullish rebound from present levels.

Section 1: Direxion Daily Energy Bear 2X ETF - ERY

The Fund seeks daily investment results, before fees and expenses, of two times (200%) the inverse (opposite) of the daily percentage change in the Energy Select Sector Index. The Fund is an ETF that utilizes financial derivatives such as swap agreements and futures contracts to achieve its targeted exposure to the underlying energy sector.

Its performance over extended periods diverges from the expected -200% due to the compounding effect of daily returns, which is influenced by factors such as holding duration and market volatility. High volatility can significantly magnify the impact of compounding, potentially leading to returns that differ materially from the inverse of the underlying index’s performance. Consequently, this ETF is designed for short-term tactical trading rather than long-term buy-and-hold strategies.

Section 2: Technical Analysis on ETF and Underlying Asset

NYSE: ERY

Direxion Daily Energy Bear 2X ETF (ERY) is currently experiencing a significant downward trend. However, a noticeable spike in volume suggests potential accumulation at current levels, which could support a near-term upward move. The 14-period Relative Strength Index (RSI) is in the oversold zone, indicating that recent selling pressure may be overstretched and could ease in the short term, allowing for a possible recovery. That said, the ETF remains below its 20- and 50-period Simple Moving Averages (SMAs), which are likely to act as immediate resistance levels and may limit any sharp upside. Overall, while the broader trend remains weak, the technical setup points toward a potential short-term bullish rebound from current levels.