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It's Time To Consider Leveraged Healthcare ETFs

ETF Professor

For traders using leveraged sector exchange-traded funds, one key to successfully using these products in the short-term fashion in which they are intended is to treat leveraged ETFs as event-driven trades.

Those events include earnings announcements, mergers and acquisitions headlines and, for leveraged healthcare ETFs, clinical trial data reports and industry conferences.

What Happened

With one of the industry's marquee conferences recently ending, traders may want to consider the Direxion Daily Healthcare Bull 3X Shares (NYSE: CURE) and the Direxion Daily S&P Biotech Bull 3X Shares (NYSE: LABU).

The American Society of Clinical Oncology Annual Meeting ended this week, which could bring CURE and LABU into focus for active traders.

CURE attempts to deliver triple the daily returns of the Health Care Select Sector Index (IXVTR) while LABU looks to deliver triple the daily returns of the equal-weight S&P Biotechnology Select Industry Index (SPSIBITR).

Why It's Important

“The meeting came at an interesting time for the healthcare market,” said Direxion in a recent note. “Against a backdrop of several Congressional hearings on the rising costs of drugs in this country, healthcare and biotech stocks have underperformed the overall market in 2019.”

LABU is often one of the most volatile bullish leveraged funds in the Direxion stable, which is to be expected when pairing leverage and biotechnology. Conversely, CURE is usually one of the more docile Direxion leveraged sector funds.

CURE is up 6.65 percent this week while LABU is up 0.79 percent after tumbling 4.87 percent on Thursday.

What's Next

While CURE has been mostly calm in recent days, the leveraged healthcare fund and its biotechnology counterpart LABU could still feel some impact from the ASCO conference.

“Results presented at ASCO may have major ramifications for the market, even as macro events cast their shadow. Last year’s ASCO star, Loxo Oncology, got bought by Eli Lilly in January,” according to Direxion. “And though the long-term picture on the sector will remain cloudy until we get some clarity on how Congress intends to act on drug pricing, one way or the other we’re going to see some volatility this weekend.”

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