Much like the Yin and Yang that represent good and evil in Chinese mythology, their financial counterparts represent how China as a whole is doing. For those of you who do not know, the YINN (Direxion Daily China Bear 3x Shares ETF) bets on China. For every one percent China goes up, you make three times that much money. The YANG (Direxion Daily China Bull 3x Shares ETF) does the opposite, it bets against the Chinese market, and every time it goes down 1 percent, the stock goes up three times. Over the past 30 days, China has fallen more than 25%. This chart of the SSE Composite Index (an index of all stocks traded in the Shanghai Stock Exchange) from Yahoo Finance clearly shows the decline in Chinese Markets from its peak on June 5.
The red line is the S&P500s performance over the same time period of 3 months.
So what does this mean for YINN and YANG? Well, YANG has fallen from over $2500 in 2011 to a little less than $80 right now. It’s a big mover in the way that it has potential to make $15 in a day, and fall $20 the next, but its entire stock price revolves around the Chinese Market doing poorly, and that’s a terrible bet to make; especially since China has been one of the fastest growing markets in the world for the past decade. Right now YINN is in an incredible position: its fallen from over $65 in April, to $30 this month. It’s a steal.
Let’s take a look back in history when the Oracle of Omaha – Warren Buffet – bought thousands of shares of CocaCola (Ticker: KO) after its stock was decimated by health concerns and factory malfunctions. His philosophy was simple:
The best thing that happens to us is when a great company gets into temporary trouble…We want to buy them when they’re on the operating table.
Like that, we want to buy excellent stocks at extremely low prices and sell at an incredibly high rate. In essence, buy low sell high. China will recover, it has to. China isn’t undergoing a recession, it’s undergoing a market correction. As soon as China picks itself up, YINN will pick up too. It’s a stock betting bull on one of the best markets in the world, and it’s a steal.