Benzinga - by Joshenomoto@benzinga.com, .
Electric vehicle manufacturer Tesla, Inc. (NASDAQ:TSLA) has received ample news coverage recently, providing viable ground for speculation on both ends of the sentiment spectrum. Fundamentally, TSLA stock may be trading at a relative discount compared to prior highs. Furthermore, the EV maker's efforts to offer products geared toward modest-income households could also potentially pay off. Still, the underlying market remains challenging, leading to many open questions.
On the positive front, TSLA stock has been moving higher on the broader implications of Tesla shareholders approving CEO Elon Musk's $56 billion pay compensation package. The vote was overwhelmingly in favor of the proposal, with 77% of votes cast being in favor of approving the pay compensation package. Cantor Fitzgerald analyst Andres Sheppard remarked that the vote should help "re-solidify" Musk's commitment to materializing the EV juggernaut's strategic goals.
Furthermore, Musk recently stated that three new vehicles are currently being developed behind closed doors. "Obviously we've got some new products that we're working on under the covers," the head executive stated at the company's annual shareholder meeting last Thursday. "I think these are going to be pretty special." Tesla has indicated that it aims to launch more affordable EVs by early 2025.
Still, not everyone is convinced that TSLA stock is bound for upside success. For one thing, EV sales have been slowing down, prompting a strategic pivot among legacy automakers. Headwinds such as elevated inflation and high borrowing costs have crimped consumer demand. Also, some experts have labeled Tesla as a severe market bubble bound for an implosion.
Given the dynamism of the opinion train, TSLA stock provides a robust canvas for trading. That's where Direxion exchange-traded funds enter front and center stage. Those in the bullish camp may consider the Direxion Daily TSLA Bull 2X Shares (NASDAQ:TSLL), which aims to provide 2X leverage against the underlying security. For the bears, Direxion Daily TSLA Bear 1X Shares (NASDAQ:TSLS) provides an opportunity to bet against the EV maker.
To be clear, both the TSLL and TSLS are only appropriate for short-term positions. Due to the compounding effect of daily resetting the leverage or the counter performance of an inverse fund, the actual returns of either TSLL or TSLS could become disassociated with their expected returns if positions are held over a long-term period.
The TSLL Chart: TSLL is attempting to break out of the horizontal trend line situated around the $7.55 level. Notably, higher volume levels suggest that participation has been rising since early April.
- Presently, TSLL is up around 11% from its 20-day exponential moving average (EMA). Furthermore, the leveraged ETF is trading approximately 14% above its 50-day moving average (DMA). However, it's noteworthy that TSLL is well below its longer-term 200 DMA.
- Since June 5, the 2X fund’s acquisition volume has been rising, generally confirming the current rally. However, Monday's volume was conspicuously lower than Thursday's metric, when TSLA stock enjoyed a significant pop higher.
The TSLS Chart: A potentially more exciting playground, TSLS appears to be struggling to hold onto key support levels. Still, if bad news materializes for the underlying EV maker, the inverse fund has demonstrated a propensity to shoot higher rapidly.
- At the moment, TSLS is sitting right atop its 200 DMA. That's intriguing because this level also coincides with a long-term horizontal support line. The inverse fund must rise higher from here to avoid the prospect of further technical damage.
- Clouding the narrative is the overall participation rate. There's a noticeable decline in average volume during May and the month so far compared to levels seen in March and April.
Featured photo by Blomst on Pixabay.
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