Chinese stocks came under pressure Tuesday after theĀ U.S. Centers for Disease Control and Prevention (CDC) announced that coronavirus, a new illness that surfaced last month in Wuhan, China, had spread to the United States. The virus has currently claimed nine lives in China.

As well as the health-related fallout, the illness has stoked fears of economic contagion, with the potential to disrupt travel and commerce. Some experts have even drawn similarities to the 2003 SARS crisis that killed almost 800 people and caused a slowdown across Asia.

"From an investment standpoint, the risk with any virus is in the scope of its economic impact, and the mere fact that this has spread from China overnight to the U.S. so quickly reinforces the idea that the negative fallout could be global rather than local," Alec Young from FTSE Russell wrote, per Barron's.

Those who expect the illness to continue rattling Chinese stock markets in the near term should add these three China inverse exchange-traded funds (ETFs) to their watchlist. Each fund staged an explosive breakout in Tuesday's trading session that may pave the way higher for further gains in the coming days. Let's look more closely at several trading plays.

ProShares UltraShort FTSE China 50 (FXP)

Created at the dawn of the global financial crisis in November 2007, the ProShares UltraShort FTSE China 50 (FXP) aims to deliver two times the inverse daily return of the FTSE China 50 Index. This benchmark consists of 50 large-capitalization Chinese stocks listed on the Hong Kong Stock Exchange (HKSE). The fund, which controls over $35 million in assets, effectively provides traders with short exposure to Chinese companies such as Tencent Holdings Limited (TCEHY) and China Construction Bank Corporation (CICHF). Trading wise, a tight 0.04% average spread and daily turnover of roughly 20,000 shares keep costs manageable. As of Jan. 22, 2020, FXP pays a 1.2% dividend yield, charges a 0.95% management fee, and has fallen 26.83% over the past year.

The ETF's share price has traded within a narrow falling wedge since the start of the fourth quarter. A sharp breakout above the pattern on the heaviest trading volume so far this year increases the likelihood of follow-through buying. Traders who buy at current levels should set a take-profit order near $61, where price may encounter resistance from a downtrend line that has been intact since mid-August. As this is a momentum breakout play, keep a tight stop under yesterday's low at $54.21 to protect against a sudden reversal.

Chart depicting the share price of the ProShares UltraShort FTSE China 50 (FXP)

Direxion Daily FTSE China Bear 3X Shares (YANG)

With net assets of $67.51 million, the Direxion Daily FTSE China Bear 3X Shares (YANG) has an objective to return three times the inverse daily performance of the FTSE China 50 Index, making it ideal for traders who want to take a slightly more aggressive bet against large liquid Chinese stocks. Financials represent almost 50% of the underlying index, making the ETF a particularly suitable instrument to short this economically sensitive sector. Spreads closely align with those of FXP, while turnover of more than 200,000 shares offers traders ample liquidity. The fund's 1.08% management fee isn't a key consideration given its short-term tactical mission. As the ETF rebalances daily, long-term returns may deviate from the advertised leverage due to the effect of compounding. YANG issues a 1.54% yield and has dropped nearly 10% since the start of the year as of Jan. 22, 2020.

Because the ETF tracks the same index as FXP, it's no surprise that both charts closely resemble one another. Yesterday's breakout above a falling wedge on sizable volume also corresponds with the moving average convergence divergence (MACD) line crossing above its signal line to generate a buy signal. Those who take a trade should look for a test of the $47.50 area, where the fund finds considerable resistance from a six-month downtrend line and falling 200-day simple moving average (SMA). Stops could either sit below Monday's low or beneath the wedge pattern's top trendline, depending on risk tolerance.

Chart depicting the share price of the Direxion Daily FTSE China Bear 3X Shares (YANG)

Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD)

The Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD) seeks to return the inverse daily performance of the CSI 300 Index. The tracked benchmark comprises 300 large China-A shares, which trade on the Shanghai and Shenzhen mainland exchanges. CHAD allows traders to take an indirect play against Chinese companies like Ping An Insurance (Group) Company of China, Ltd. (PNGAY), Kweichow Moutai Co., Ltd. (600519.SS), and China Merchants Bank Co., Ltd. (CIHKY). An average four-cent spread may be too wide for capturing small intraday moves but works well for taking advantage of swing trading opportunities. Around 15,000 shares change hands per day; therefore, traders should consider using limit orders to avoid slippage costs. As of Jan. 22, 2020, the ETF has a $17.83 million asset base and is trading down just over 3% year to date. It yields 3.53%.

Like the two funds above, CHAD carved out a textbook falling wedge over the past few months but looks to have broken the shackles in Monday's trading session with an impressive upside breakout. Price should have no trouble advancing toward resistance at the $29 level given the relative strength index (RSI) shows a reading well below overbought territory. Those who decide to buy the fund should place a stop order somewhere below $27.

Chart depicting the share price of the Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD)