Direxion's METU And METD Funds Allow Traders To Play Both Sides Of Meta Platforms Stock

Meta Platforms Inc META suffered under the wake of a broader technology sector rout, with presidential candidate Donald Trump suggesting that Taiwan should compensate the U.S. for its defense. As for the tech powerhouse, while Wall Street analysts are overwhelmingly bullish on META stock, concerns about forward viability have started to impact the current price action.

On the positive front, the social media giant – which owns Facebook along with other popular digital properties – recently received a major endorsement. On Tuesday, Wolfe Research initiated coverage of META stock, pegging it with an Outperform rating along with a price target of $620. Against the close of the July 17 session, the forecast represents a return of 34.2%.

Wolfe's Shweta Khajuria stated in a research note to clients that Meta benefits from its massive scale, along with robust growth in its top line. In addition, the expert stated that META stock could enjoy a tailwind from the underlying company's investments in artificial intelligence.

Most importantly, Khajuria believes that Meta's advertising platform represents a must-have solution for digital-centric enterprises. However, it's the ad ecosystem itself that has also contributed to challenges for META stock.

An overwhelming percentage of the tech juggernaut's revenue stems from its digital ad business. However, in prior months, significant issues related to this advertising system contributed to higher costs and poorer results for marketing clients.

Further, skeptics will note that in terms of earnings surprises – or the magnitude by which bottom-line results beat analysts' targets – the trend has been decisively negative since the third quarter of 2023. In other words, there's plenty of fodder for both bulls and bears of META stock.

The ETFs: Given the rich backdrop of narratives, this framework provides ample relevance for META-specific exchange-traded funds. First, the Direxion Daily META Bull 2X Shares METU provides 2X exposure to the tech juggernaut. Because of the compounding effect, METU is only appropriate for positions opened and closed within the same day. At the same time, speculators could see their returns accelerate considerably if they happen to call the market correctly.

On the other end of the scale, the Direxion Daily META Bear 1X Shares METD provides a 1X inverse exposure to META stock; that is, as the target equity falls in value, this ETF rises. However, because of the similar compounding effect, investors should be in and out of their position within the same day.

The METU Chart: Since its introduction in early June to the first few days of July, METU witnessed a significant surge in value. However, as selling pressure impacted META stock, the leveraged fund witnessed a considerable erosion in sentiment.

• The July 17 session saw METU drop more than 11% as tech sector woes dragged down large-capitalization innovators.
• In the technical charts, METU printed a red candlestick with no upper wick or shadow. This dynamic may indicate that sellers dominate the market.

The METD Chart: As expected, the trend of the METD ETF represented the inverse of META stock, slipping during the period between early June and early July. However, in the past few sessions, the bear fund rocketed higher as top-tier tech names struggled under volatile pressure.

• On July 17, METD gained 5.87% of market value, which was almost the exact inverse performance of META stock, which dropped 5.68%.
• METU charted a white candlestick with no lower wick or shadow. This suggests that from the opening bell, pessimists were bullish on the inverse fund (meaning bearish on the underlying asset), thus establishing control of the market.

Featured photo by Thomas Ulrich from Pixabay.

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