Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in GOOGL.
Earlier this year, shares of Alphabet, Inc. (Ticker: GOOGL) were in a strong uptrend and one of the leading-performing stocks within the “Magnificent Seven.” However, over the past few weeks, the stock has been on the retreat as it faces increasing regulatory scrutiny, and woes on the anti-trust front. Could this spell further trouble for Alphabet, or does it present a dip-buying opportunity?
Is an Alphabet Breakup Priced in?
A federal judge in the United States recently ruled that the subsidiary of Alphabet, Inc., Google, violated Section 2 of the Sherman Anti-Trust Act, and that the company behaved in unethical ways to maintain a business monopoly.
The focus of the ruling was around exclusive deals with smartphone makers like Apple and Samsung to be the default search engine for internet browsing on their mobile devices. Over the years, Google was able to notch an $8 billion deal with Samsung, while the revenue-sharing arrangement with Apple amounts to over $20 billion per year.
There will likely be an extended appeal process that hangs up the final ruling in the courts. However, even if smartphone users are given a choice in terms of choosing a browser, Google has a legacy status as a search engine, so the long-term impact on Alphabet’s bottom line may only be marginal.
Traders that think the recent pullback in Alphabet is a dip-buying opportunity may find a position with Direxion’s Daily GOOGL Bull 2X Shares (Ticker: GGLL), which seeks daily investment results, before fees and expenses, of 200% of the performance of Alphabet, Inc. Class A shares (Ticker: GOOGL).
Below is a daily chart of GOOGL as of August 15, 2024.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
The slanted blue lines represent a downtrend. A downtrend describes the price movement of a financial asset when the overall direction is downward.
Could a Broader Economic Slowdown Cause Bigger Issues?
It’s not just regulatory concerns that Alphabet has to grapple with in the near-term, but also prospects of a broader economic slowdown. The rate of economic growth has already started to slow, as evidenced by recent Gross Domestic Product (GDP)* data, but we’ve yet to print a negative number on that front yet.
The next GDP report for the second quarter is slated to be released on August 29. Expectations are for 2.8% growth in the second quarter, but if this comes in below estimates, or below the Q1 growth rate of 1.4%, it could raise concerns that the economy is indeed slowing.
In this situation, Direxion’s Daily GOOGL Bear 1X Shares (Ticker: GGLS), which seeks daily investment results, before fees and expenses, of 100% of the inverse of the performance of Alphabet, Inc. Class A shares (Ticker: GOOGL) may offer a nice swing trade.
Single Stock and Sector Alternatives
For traders wanting to trade in other individual, leveraged equity names, Direxion offers funds that track names like Apple, Meta, Nvidia, Amazon, and more. Investing in the Funds is not equivalent to investing directly in the underlying stocks.
The Direxion Daily AAPL Bull 2X Shares (Ticker: AAPU) seeks daily investment results, before fees and expenses, of 200% of the performance of Apple Inc. common stock, while the Direxion Daily AAPL Bear 1X Shares (Ticker: AAPD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Apple Inc. common stock.
The Direxion Daily META Bull 2X Shares (Ticker: METU) seeks daily investment results, before fees and expenses, of 200% of the performance of Meta Platforms, Inc. common stock, while the Direxion Daily META Bear 1X Shares (Ticker: METD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Meta Platforms, Inc. common stock.
The Direxion Daily NVDA Bull 2X Shares (Ticker: NVDU) seeks daily investment results, before fees and expenses, of 200% of the performance of NVIDIA Corporation common stock, while the Direxion Daily NVDA Bear 1X Shares (Ticker: NVDD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of NVIDIA Corporation common stock.
The Direxion Daily AMZN Bull 2X Shares (Ticker: AMZU) seeks daily investment results, before fees and expenses, of 200% of the performance of Amazon.com, Inc. common stock, while the Direxion Daily AMZN Bear 1X Shares (Ticker: AMZD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Amazon.com, Inc. common stock.
Traders seeking broader and more leveraged exposure in the equity sector may find an opportunity with Direxion’s Daily S&P 500 Bull 3X Shares (Ticker: SPXL) and Direxion Daily S&P 500 Bear 3X Shares (Ticker: SPXS), which seek daily investment results, before fees and expenses, of 300%, or -300%, respectively, of the performance of the S&P 500 Index*.
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Funds have derived all disclosures contained in this document regarding Class A shares of Alphabet Inc. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Class A shares of Alphabet Inc. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Class A shares of Alphabet Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Class A shares of Alphabet Inc. could affect the value of a Fund’s investments with respect to Class A shares of Alphabet Inc. and therefore the value of the Funds.
Technology Sector Risk — The market prices of technology related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. Technology securities may be affected by intense competition, obsolescence of existing technology, general economic conditions and government regulation and may have limited product lines, markets, financial resources or personnel.
Alphabet Inc. Class A Investing Risk — Alphabet Inc.'s Class A shares face risks associated with reliance on advertising revenue and the effect that loss of partners or new and existing technologies that block advertisements online may have on its business; intense competition for its products and services; investments in new businesses, products, services and technologies that may harm its operating results; slowdowns in its revenue growth rate; the ability to protect its intellectual property rights; the ability to maintain or enhance its brands and its impact on the ability to expand its user base, advertisers, customers, content providers and other partners; manufacturing and supply chain issues; interruptions to, or interferences with, its complex technology and communication systems; its international operations; failure to evolve with the advancement of technology and user preferences; data privacy and security concerns; problematic content posted by users; and regulatory, legal and litigation issues.
Direxion Shares Risks – An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund's investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund's other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning. Risks of the Funds include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Alphabet Inc. Class A Investing Risk, Market Risk, Industry Concentration Risk, Indirect Investment Risk, Cash Transaction Risk, and risks specific to the technology sector amd internet company industry. Additional risks include, for the Direxion Daily GOOGL Bull 2X Shares, Leverage Risk and Daily Correlation Risk, and for the Direxion Daily GOOGL Bear 1X Shares, Shorting or Inverse Risk as well as Daily Inverse Correlation Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of the Funds.