ETFs
Direxion Daily TSLA Bull And Bear ETFs Give Traders the Flexibility to Take Advantage of Rough Waters
Electric vehicle manufacturer Tesla, Inc. (NASDAQ: TSLA) has received extensive media coverage recently, providing viable ground for speculation on both ends of the sentiment spectrum. Basically, TSLA stock may be trading at a relative discount to previous highs. Additionally, the electric vehicle maker’s efforts to offer products aimed at lower-income households could also bear fruit. The underlying market, however, remains challenging, raising many open questions.
On the positive side, TSLA stock rose due to the broader implications of Tesla shareholders’ approval of CEO Elon Musk’s $56 billion compensation package. The vote was overwhelmingly in favor of the proposal, with 77% of votes cast in favor of approving the salary compensation program. Andres Sheppard, an analyst at Cantor Fitzgerald, noted that the vote should help “resolidify” Musk’s commitment to delivering on the electric vehicle giant’s strategic goals.
Additionally, Musk recently said that three new vehicles are currently being developed behind closed doors. “Obviously we have some new products that we’re working on in secret,” the chief executive said at the company’s annual shareholder meeting last Thursday. “I think it’s going to be pretty special.” Tesla has indicated plans to launch more affordable electric vehicles by early 2025.
Still, not everyone is convinced that TSLA stock is destined for bullish success. On the one hand, sales of electric vehicles have slowed, leading to a change in strategy among traditional automakers. Headwinds such as high inflation and high borrowing costs have dampened consumer demand. Additionally, some experts have called Tesla a serious market bubble destined to implode.
Given the momentum of the sentiment train, TSLA stock provides a solid trading framework. This is where Direxion exchange-traded funds come into the picture. Those in the bullish camp may consider the Direxion Daily TSLA Bull 2X Stock (NASDAQ: TSLL), which aims to provide 2X leverage on the underlying security. For the bears, Direxion Daily TSLA Bear 1X Stock (NASDAQ:TSLS) offers the opportunity to bet against the electric vehicle manufacturer.
To be clear, TSLL and TSLS are only suitable for short-term positions. Due to the cumulative effect of daily leverage reset or underperformance of an inverse fund, the actual returns of TSLL or TSLS could be decoupled from their expected returns if positions are held on a long-term period.
The TSLL graph: TSLL is attempting to break out from the horizontal trendline located around the $7.55 level. Notably, higher volume levels suggest that participation has increased since early April.
- Currently, TSLL is up about 11% from its 20-day exponential moving average (EMA). Additionally, the leveraged ETF is trading approximately 14% above its 50-day moving average (DMA). However, it is worth noting that TSLL is well below its long-term DMA of 200.
- Since June 5, the acquisition volume of the 2X fund has been increasing, generally confirming the current rally. However, Monday’s volume was noticeably lower than Thursday, when TSLA stock saw a significant rise.
The TSLS graph: A potentially more exciting playing field, TSLS appears to be struggling to maintain key support levels. Nonetheless, if bad news materializes for the underlying electric vehicle maker, the inverse fund has demonstrated a propensity to rise quickly.
- At the moment, TSLS sits just atop its 200 DMA. This is intriguing because this level also coincides with a long-term horizontal support line. The inverse fund must increase from there to avoid the prospect of further technical damage.
- The overall turnout obscures the narrative. There is a notable decline in average volume in May and for the month to date compared to the levels seen in March and April.
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