Nvidia's Pre-Earnings Showdown Offers Opportunities For Both Bulls And Bears Through Direxion's NVDA ETFs

Nvidia Corp NVDA is set to release its much-anticipated earnings report for the fiscal second quarter of 2025 tomorrow after the closing bell. While analysts are largely bullish on NVDA stock, enough questions have sprouted to lay the groundwork for a tug-of-war. As such, nimble traders looking to play both sides of the market may enjoy robust profit-scalping opportunities.

Looking at the view on Wall Street, covering experts anticipate that Nvidia will generate earnings per share (EPS) of 64 cents. In the year-ago quarter, the company posted EPS of 25 cents (on a split-adjusted basis). On the top line, analysts are targeting revenue of $28.68 billion, well above fiscal Q2 2024's print of $13.51 billion.

Fundamentally, all eyes will be focused on management's ability to communicate a strong message regarding artificial intelligence. In the past five years, NVDA stock gained more than 2,918%, mostly off the back of its advanced graphics processors. These specialized semiconductors undergird various AI protocols, making the company an invaluable resource in the race to develop machine intelligence.

However, not everyone is fully convinced that NVDA stock will continue marching higher. Recently, trader and market analyst Steve Grasso disclosed that he had sold all of his holdings of Nvidia ahead of the Q2 report. Furthermore, the expert stated that he would let NVDA "trade a bit" before deciding on a potential reentry.

Perhaps most conspicuously, Goldman Sachs a few months ago stated that it believes enterprises will invest over $1 trillion in AI in the coming years. However, the investment bank expressed concerns about whether the productivity returns will justify such expenditures.

With a vast array of opinions, it's possible that NVDA stock could be choppy over the next few sessions. While Nvidia should beat its upcoming earnings estimate, NVDA's price action may depend on the magnitude of the beat. In Q2 of last year, the company enjoyed an earnings surprise of 31.6%. Over every subsequent quarter, this metric has steadily declined to 9.8% in fiscal Q1 2025.

The ETFs: Given the uncertainty that has crept into the narrative for NVDA stock, this dynamic opens the door to opportunities through Direxion's Nvidia-focused exchange-traded funds. On the one end, those who are confident in the tech juggernaut may consider Direxion Daily NVDA Bull 2X Shares NVDU. This is a leveraged ETF that seeks to deliver 200% of NVDA's daily investment results.

For those who want to play the contrarian role, Direxion Daily NVDA Bear 1X Shares NVDD offer a convenient mechanism to short the semiconductor stalwart. NVDD offers 100% of the inverse performance of NVDA.

Primarily, Direxion offers a convenient mechanism for retail traders to apply leverage or to short securities without having to resort to the complexities (and risks) of options trading. However, investors must be careful with leveraged and inverse ETFs – these products are appropriate only for positions held for less than one day. Holding such products for longer than a day may result in value decay.

The NVDU ETF: As expected, NVDU mostly mirrored the performance of NVDA stock but in a significantly amplified manner. Since the start of the year, the 2X fund gained just under 298%. During the same period, NVDA gained 162.5%.

• NVDU clearly demonstrated strong demand around the $70 level. However, since June 18, the leveraged fund has been charting a series of higher lows.
• For the bulls, the next targeted move will be to break out of the sideways consolidation pattern at $109 and push toward the psychologically significant $120 level.
• Acquisition volume has been steadily rising for the most part since late December last year, indicating burgeoning demand.

The NVDD ETF: Unsurprisingly, the NVDD ETF has not performed well this year, losing just over 68% of market value since the beginning of January. Attempts to hold onto key support lines have failed as NVDA stock marched northward.

• NVDD sits conspicuously below both its 50-day moving average ($7.97) and its 200 DMA ($13.52). At a closing price of $7.28 on Monday, it's also trading below a key support line at $7.50.
• The bears’ first priority is to reestablish support at $7.50 and then to break into the $8 level. A less-than-stellar Q2 earnings report might do the trick.
• Interestingly, acquisition volume for the inverse fund has been strong. This may indicate that more traders are interested in the contrarian narrative as the bullish camp could be overcrowded.

Featured photo by Nana Dua from Pixabay.