You could do it by having it drop particles that follow like a trail of smoke, fading and shrinking. But they may look like bubbles if it's moving fast, and they would have to be circles, as particles don't rotate.
That could also be done with a trail of sprites, but again, would look like a chain of balls, especially when fading.
You could also use a transparent background where nothing gets erased. You put a sprite with a color (or image) matching the background over the top of the sprite with the trails, the transparency draws over the old tails, fading them slightly, making the oldest completely faded away.
You can see the effects in my modded particle demo: https://www.scirra.com/tutorials/761/particle-demo-capx
Set ALL layers "transparent" property to transparent.
In the project properties, set "Clear Background" to "NO."
Here's an example capx: https://dl.dropboxusercontent.com/u/85412219/forumposts/FadeOutDemo.capx
(screenshot of the capx)