Insights into Nvidia Corp’s Momentum
The recent underperformance of Nvidia Corp (NVDA) stock has raised eyebrows in the tech realm. While analysts have historically been bullish on NVDA, recent quarterly revenue growth has exhibited a decline, leading to a 2% loss in equity value over the last five business days.
Nevertheless, Nvidia has ventured into exciting partnerships, like the one with Alibaba Group Holding’s (BABA) cloud-computing unit, to enhance China’s smart vehicle market. This move aligns with the vast potential of the global automotive AI sector, valued at $2.99 billion in 2022.
Derivatives Market Sentiments and Implications
The derivatives market has adjusted to the slowdown in NVDA stock, evident in the relatively lower implied volatility compared to historical levels. This situation creates an intriguing scenario for options trading, potentially impacting exchange-traded funds (ETFs) associated with Nvidia.
Lower volatility projections often lead to discounted options premiums, attracting both call and put option buyers. Consequently, an uptick in NVDA options trading could drive increased demand for leveraged ETFs and derivative products.
Direxion’s Role in Leveraged ETF Landscape
Direxion, a renowned provider of financial products, offers compelling leveraged ETFs backed by instruments like swaps and futures contracts. The Direxion Daily NVDA Bull 2X Shares (NVDU) aims for 200% daily performance of Nvidia shares, while the Direxion Daily NVDA Bear 1X Shares (NVDD) seeks 100% inverse performance.
Investors must note that these ETFs are designed for short-term exposure, as prolonged holding may result in volatility drag. Despite this, NVDU has exhibited remarkable gains, while NVDD faces challenges amid market fluctuations.
Performance Overview
The NVDU ETF: With over 220% gains since the year’s start, NVDU showcases robust performance, albeit with a slowdown in recent months. Technical indicators suggest a potential bullish formation starting from April.
- NVDU gained 21.5% in the last six months.
- The ETF’s price hovers between the 50-day and 200-day moving averages.
- A bullish pennant formation might be in play since April.
The NVDD ETF: In contrast, the NVDD ETF has experienced challenges, losing 66% year-to-date. However, recent upticks hint at a possible reversal, though the bearish case faces hurdles in breaching key moving averages.
- NVDD rose over 6% in the past month.
- The ETF struggles below the 50-day and 200-day moving averages.
- Consistent bounces off the $7.50 support level amplify pessimistic sentiments.
Featured photo by Jordan Harrison from Pexels.
