Tesla's Volatility Offers Traders Plenty of Opportunities

Tesla’s up and down market fluctuations of the past week could make any risk-averse investor queasy. But for traders who thrive on volatility, it presents plenty of opportunities. Namely, those opportunities are in leveraged ETFs like the Direxion Daily TSLA Bull 2X Shares (TSLL) and the Direxion Daily TSLA Bear 1X Shares (TSLS).

The bearish case after the electric automaker recently recorded a drop in first-quarter revenue corroborated with the broader trend in the stock’s YTD weakness. However, bulls returned shortly after Tesla’s latest earnings report after attaining self-driving approval in China, where the EV market is strong.

The electric automaker has been instituting price cuts, but to no avail. That’s because the global supply of EVs is outpacing demand. Added to that are concerns regarding weak deliveries and competition from China. But the self-driving approval could be a potential game changer.

In addition to the approval, more potential news could spell bullishness in the long run. Specifically, Tesla is looking to launch new models in 2025. That should could regenerate excitement in the brand. Also, the long-term trend still supports the increased adoption of EVs, which opens up another potential trade.

Broad Trend Supports EVs

The broad trend could open opportunities in the Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares (EVAV). The fund seeks to achieve 200% of the daily performance of the Indxx US Electric and Autonomous Vehicles Index. The International Energy Agency (IEA) doesn’t foresee the demand for EVs dwindling despite any short-term weakness the industry may be exhibiting.

“The continued momentum behind electric cars is clear in our data, although it is stronger in some markets than others,” said IEA Executive Director Dr. Fatih Birol. “Rather than tapering off, the global EV revolution appears to be gearing up for a new phase of growth. The wave of investment in battery manufacturing suggests the EV supply chain is advancing to meet automakers’ ambitious plans for expansion. As a result, the share of EVs on the roads is expected to continue to climb rapidly.”

The index EVAV tracks provides exposure to 25 U.S.-listed companies poised to disrupt the existing transportation market by bringing new and cleaner modes of transportation, such as electric and autonomous vehicles. It includes companies beyond vehicle manufacturers to paint a more holistic picture of the industry. The index includes charging station manufacturers such as ChargePoint and Blink, companies involved in software development and the manufacturing of various electrical components, and electric vehicle manufacturers such as Tesla, Lucid, and NIO.

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