New Political Era Delivers Potential Opportunities For Direxion's Mobility-Focused EVAV ETF

Electric vehicle manufacturer Tesla Inc TSLA has enjoyed remarkable success over the past year, and circumstances may brighten even more amid a new political era. With Donald Trump entering his second term, market sectors associated with him or his proposed policies have generally performed well. Conspicuously, TSLA stock saw a big jump in value immediately following the presidential election.

Indeed, on Nov. 6, TSLA stock closed at $288.53, meaning that the equity really hasn't looked back since election day. While it's true that Trump is a big proponent of hydrocarbon energy – even declaring that the U.S. will "drill, baby, drill" while announcing a set of executive orders – he's also close with Tesla CEO Elon Musk.

Potentially, this relationship could yield favorable conditions for the EV manufacturer. In particular, Tesla researcher Troy Teslike outlined the possibility that Trump may choose to leave the eligibility criteria of EV tax credits untouched for a period of time. Such a scenario would allow potential buyers time to pick up their Teslas while utilizing the tax credit.

However, the excitement over the new wave of mobility extends far beyond one entity's ambitions. According to the International Energy Agency, nearly one in five cars that were sold in 2023 were electric-powered. In nominal terms, the figure rose to nearly 14 million units, with 95% of this figure allocated to the Chinese, European and U.S. markets.

The Direxion ETF: With adoption accelerating worldwide, investors may consider a sector-based exchange-traded fund. One potential idea which deploys leverage for additional kick is the Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares EVAV. Per Direxion's website, EVAV seeks 200% of the performance of the Indxx US Electric and Autonomous Vehicles Index.

As investors might expect, the index's biggest exposure is to TSLA stock, with a weighting of 11.26%. Coming in a close second, though, is Cerence Inc CRNC, a multinational software firm that develops artificial intelligence assistant technology primarily for deployment in automobiles. Ranking third is domestic Tesla rival Rivian Automotive RIVN. As well, EVAV brings to the table exposure to multiple Chinese EV specialists.

One of the main points of attraction for EVAV stock is convenience. Rather than take risks on individual EV companies, an investor can gain exposure to a basket of securities under one umbrella. In addition, the 2X leverage of this bull fund provides the possibility of robust returns without having to engage in more complex transactions, such as options.

Nevertheless, it's important for prospective traders to understand the unique risks associated with leveraged ETFs. In particular, Direxion notes that EVAV should not be expected to provide two times the return of the benchmark's cumulative return for periods greater than a day. Holding onto this ETF for longer than one trading session may expose stakeholders to value decay due to the daily compounding of leverage.

The EVAV ETF: Against a longer-term framework, EVAV doesn't initially seem enticing, given its trailing 52-week loss of over 11%. However, since late summer last year, the bull fund has been steadily swinging higher.

On a technical level, EVAV has been rising in a clearly defined ascending trend channel, with the 50-day moving average providing rising support.
Although the bears attempted to drive EVAV down in November, the bulls quickly asserted control, providing confidence for speculators.
Next steps will involve decisively securing the $25 baseline while making a concerted effort to rise above the psychologically important $30 level.