Clashing Opinions Deliver Ample Trading Grounds For Direxion's TSLA Bull And Bear ETFs

Although few would doubt the genius of Tesla Inc TSLA CEO Elon Musk, even the world's richest man is not immune to severe – and potentially crippling – criticism. Due to significant headwinds impacting the electric vehicle manufacturer, Musk's net worth suffered a sizable erosion. As such, the volatility in TSLA stock has raised serious questions about the underlying company's path forward.

Worryingly, in the European market, Tesla's sales shockingly plunged 45% in January. Even more conspicuous, during the same period, the region's market for all EVs expanded by 37%. To be sure, a good deal of the performance drag can be attributed to intense competition from Chinese automakers, along with slowing consumer demand.

However, it's also fair to point out that Tesla's head executive incurred unforced and unnecessary errors. As several news publications reported earlier this year, Musk's social media posts have lent support to right-wing protests and advocacy movements. Furthermore, his close ties with President Donald Trump have made Tesla EVs a target for vandalism.

In an effort to shift the tide, President Trump initiated a publicity stunt for Tesla in front of the White House recently. However, sales and inventory data revealed that the event had a minimal impact on the company's top line, potentially demonstrating the general distaste consumers have for the EV brand right now.

At the same time, not everyone agrees with the doom-and-gloom narrative. RBC Capital analyst Tom Narayan maintained an Outperform rating on TSLA stock, stating a belief that demand fears are likely overblown. While the expert does cite concerns about used car prices for certain Tesla models, the decline in Europe and China might not be terribly significant. These markets in Narayan's view represent a small portion of Tesla's overall sales.

In addition, Cantor Fitzgerald analyst Andres Sheppard lifted TSLA stock to Overweight from Neutral, while maintaining a $425 price target. This assessment followed the expert visiting the EV manufacturer's Austin Gigafactory and artificial intelligence data centers. With potentially strong fundamentals, compelling strategic initiatives and a discounted valuation, TSLA may offer upside potential.

The Direxion ETFs: With TSLA stock liable to go in either direction, this potential dynamism enables speculative trading activity. For the optimists, they may consider the Direxion Daily TSLA Bull 2X Shares TSLL. On the other hand, those who remain skeptical may be interested in the Direxion Daily TSLA Bear 1X Shares TSLS.

Primarily, both ETFs offer a convenient mechanism to enjoy leverage or trades that follow bearish strategies without resorting to the complex nuances of options. According to Direxion's website, the TSLL tracks the daily investment results of 200% of TSLA stock. The TSLS, in contrast, tracks 100% of the inverse performance of TSLA.

However, prospective participants should note that exposure to these specialized exchange-traded funds is meant to last for no longer than one day. Any longer and the ETF cannot guarantee that the performance will track with the underlying security due to the daily compounding effect.

The TSLL ETF: Although one of the best performers last year, the TSLL ETF is down more than 70% this year, a sobering statistic.

Unsurprisingly, the Tesla 2X bull fund sits well below its 50-day and 200-day moving averages (DMA). Without additional support, the leveraged ETF could soon print the dreaded death cross.
It's possible that the bulls are attempting to build a baseline here, which aligns with long-term support. However, the bulls need to start moving in quickly before more technical damage occurs.

The TSLS ETF: Representing a reversal of fortune, the TSLS ETF is currently flying, gaining speculators over 57% since the start of the year.

The TSLA bear fund shot above its 50 DMA in early February and is now attempting to break above its 200 DMA.
It appears that the bears are taking a breather before amassing an attack on the $15 level. If that resistance point breaks, speculators will next set their sights on $20.