Nasdaq’s Proposed Delisting Rules
On Thursday, Nasdaq shook the financial world by unveiling plans for a harder stance on delisting processes for companies falling below listing standards. With a spotlight on penny stocks, this new regulation could mean struggling businesses facing expulsion from the stock exchange operator.
Stricter Standards for Delisting
Nasdaq’s current policy dictates that listed companies maintain a bid price above $1, with non-compliance for 30 consecutive sessions prompting a 180-day rectification period. Under the proposed changes, a share price falling below $1 for 360 market sessions will lead to immediate suspension. Companies conducting reverse stock splits within a year of such price declines could face swift delisting.
Quality Control Benefits
By elevating listing standards, Nasdaq aims to raise the bar for small-cap companies, shunting aside less robust contenders and enhancing the overall quality of the market, likely benefiting indices like the Russell 2000.
The Market Outlook
Recent boosts in small-cap stock values have deflected investor attention away from monolithic Big Tech firms, shining a favorable light on smaller enterprises in a promising market rotation.
The Direxion ETFs
Amid these shifts, Direxion offers two leveraged ETFs for risk-tolerant investors. The Direxion Daily Small Cap Bull 3X Shares mirrors 300% of the Russell 2000’s performance, while the Direxion Daily Small Cap Bear 3X Shares provides an inverse return on the same index, catering to bullish and bearish sentiments respectively.
Considerations for Investors
It’s crucial to note that these ETFs are designed for daily trading, not long-term investment, due to compounding leverage and the inherent volatility of small-cap securities, potentially leading to value decay if held over extended periods.
Market Performance
In the past month, TNA, the Bull 3X Shares ETF, displayed erratic movements, reaching a high of $49.09 before settling around $37. Meanwhile, TZA, the Bear 3X Shares ETF, dipped to $13.51 and now hovers near $17.
- Despite TNA briefly slipping below its 200-day moving average, recent market action pushed it above this vital indicator of intermediate-term market health.
- For optimistic TNA investors, securing the $38 support level and aiming for $40 could be logical next steps.
Chart Analysis for TZA
TZA faced similar volatility, dropping below key moving averages before battling back to the $17 level, with a push towards $18 and potentially $20 as the next milestones for bearish investors.
Image Credit: Mohamed Hassan from Pixabay