This Will Pop When The Market Drops

As I’ve been saying recently, the general market is in a precarious pattern.

Now the bearish momentum is beginning to increase.

Click here for a way to profit as the market drops.

Unfortunately, the market’s lower open today will make today’s trade idea one that you’ll want to take advantage of when there is a small rally.

However, the rally could happen today.

The Russell 2000 ETF (IWM) is the weakest of the major equity indexes. It is breaking below its 200-day moving average while the SPY and QQQ are just breaking their 50-day averages.

Now that the IWM has failed in its effort to trade back over its 50 and 200-day averages, the trade is to look for a new move lower.

There is a very easy way to get short the IWM and profit from its decline without having to trade a $150 ETF.

You can use the reverse ETF, Pro Shares Ultra Short Russel2k (TWM).

This ETF will rise in value when the IWM declines in value. Plus, it will move 2x as much on a percentage basis.

Therefore, if the IWM drops 5%, the TWM will rally 10%. If you look at the charts of IWM and TWM, you’ll see their patterns mirror each other.

It’s also attractive because it trades at about $15.

The trade today is to buy TWM at 15.55 or lower and have a stop below 14.75.

This is equivalent to shorting IWM and having a stop over its recent swing high.

I would look to take some profits at $18 and then use a trailing stop.

I don’t expect this to be a long-term high in the market, but it could be the beginning of a several month slide. So this is a way to profit from a slide, but it’s not a long-term position.

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily