The Russell 2000 was up about 20% by mid-March, highlighting the narrative of small cap strength in 2021. Lately, however, there's been less wind in the sails, which could help the Direxion Daily Small Cap Bear 3X Shares (TZA).
Overall, the Russell 2000 is still up 14% for the year, but has fallen 6% since that mid-March high. As such, profit-taking in small caps could give TZA a shot in the arm.
TZA seeks daily investment results of 300% of the inverse (or opposite) of the daily performance of the Russell 2000 Index. The fund invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the funds net assets.
The index measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000 Index, based on a combination of their market capitalization and current index membership.
TZA has been stuck in oversold levels and what goes down (bearishness in the Russell 2000) must eventually come up. Traders can keep this fund on their watch lists and take advantage of any short-term pullbacks in the small cap index.