Sentiment Tug-Of-War Puts The Spotlight On Direxion's NVDA-Focused Bull And Bear Funds

Easily representing one of the hottest investments in the post-pandemic landscape, tech juggernaut Nvidia Corp NVDA stands at a critical crossroads. Mere days away from its first-quarter earnings report, investors will be eager to see how management has negotiated the new economic paradigm under the Trump administration. At the same time, potentially bearish activity in the options market could be signaling broader apprehension.

So far this year, NVDA stock has barely moved above parity, a radical departure from the impressive rallies of prior years. However, in recent sessions, NVDA has come alive. In particular, the semiconductor giant is expanding its research footprint in China with a new Shanghai-based facility. The move symbolizes a strategic push to retain dominance in artificial intelligence in the region amid tightening U.S. export restrictions.

Earlier, NVDA stock also benefited from potentially thawing ties between the U.S. and China, with the two economic partners agreeing to a 90-day rollback of trade tariffs. This deal marks a cessation in the aggressive posturing that has materialized since President Donald Trump's "Liberation Day" policy last month.

Notably, the tariffs have led to wide-ranging consequences, particularly in terms of deflated consumer sentiment. Therefore, any meaningful signs of progress may lift market valuations.

At the same time, not everyone is convinced about the upward trajectory of NVDA stock. Last week, popular newsletter The Kobeissi Letter pointed to rising put option volumes among "Magnificent 7" stocks, of which Nvidia is a member. Since put options give holders the right (but not the obligation) to sell the underlying security at the listed strike price, the spike in volume raises eyebrows.

The Direxion ETFs: With the semiconductor specialist caught in a sentiment tug-of-war, this framework adds relevance for Direxion's NVDA-focused exchange-traded funds. Specifically, those who are optimistic may consider the Direxion Daily NVDA Bull 2X Shares NVDU. On the other hand, the pessimists can try their luck with the Direxion Daily NVDA Bear 1X Shares NVDD.

Primarily, the NVDU and NVDD ETFs offer a convenient mechanism for speculation. Typically, those who seek a leveraged bullish bet on NVDA stock or who want to short the security must engage the options market, which features myriad complexities. With Direxion ETFs, these units can be bought and sold like any other public security, thus easing the learning curve.

That said, the NVDU and NVDD products aren't without risks. Because of the volatility of leveraged funds, investors should approach these ETFs cautiously. Also, these funds should not be held for more than one day. Otherwise, the daily compounding effect may lead to positional erosion.

The NVDU ETF: Since the start of this year, the Direxion NVDA Bull 2X Shares has lost more than 20% of value. At the same time, a recent resurgence of momentum has buoyed the bulls' spirits.

In the past five sessions, NVDU gained over 22%, while in the trailing month, it's up more than 91%.
Currently, the 2X bull fund is creating a baseline below its 200-day moving average. Moving forward, the next obvious target is to break above $80.

The NVDD ETF: The Direxion NVDA Bear 1X Shares has also struggled this year, losing more than 15% since the January opener.

Sentiment for NVDD is a bit more problematic, with the inverse fund down more than 10% in the past five sessions.
NVDD is currently below the long-term support line represented at $5.80. Therefore, the ETF needs to pop above this level to avoid technical damage.