Direxion's QCMU And QCMD ETFs Facilitate Countervailing Trades On Tech's Unusual Sleeper

Artificial intelligence: it’s about all the business news media can seemingly discuss these days, and for good reason. Session after session, software specialists and semiconductor giants have witnessed a blistering rise in their valuations. However, one chipmaker — Qualcomm Inc. (NASDAQ:QCOM) — has been unusually quiet compared to its peers.

Indeed, it’s difficult to argue against the technical evidence. Since the start of the year, QCOM stock has gained just a little over 6%. In contrast, the benchmark Nasdaq Composite has gained over 17%. Pouring salt on open wounds, Qualcomm’s closest peers — such as Nvidia Corp. (NASDAQ:NVDA) and Broadcom Inc. (NASDAQ:AVGO) — have gained about 34% and 52%, respectively, during the same period.

It’s not for a lack of trying. For example, toward the end of September, Qualcomm unveiled the new Snapdragon X2 Elite and Snapdragon X2 Elite Extreme, billed as the fastest, most efficient Windows PC processors in the market. Engineering for ultimate performance, these units feature strong battery life and fast AI-processing in mind for consumers. Furthermore, CPU performance is up to 75% faster than competitors for the new platforms.

Sure enough, QCOM stock has responded positively to various fundamental drivers. Ironically, though, despite being one of the relative tech laggards, QCOM may be under statistical pressure for excessive bullishness.

During the trailing 10 weeks, eight of the sessions were up weeks (defined as the return between Monday’s open and Friday’s close) while only two were down weeks. Such streaks are extremely rare, and when they do materialize, the probabilistic distributional curve of expected outcomes tends to fall well below the normal distribution of baseline outcomes.

Moreover, the bears have been known to respond aggressively to QCOM stock when the underlying enterprise encounters friction. For example, shares plunged on reports that China launched an antitrust investigation into Qualcomm’s recent acquisition of Israeli firm Autotalks.

The Direxion ETFs: Although the volatility in Qualcomm stock may have turned off some speculators, the overriding point is that the security is kinetic. As a tech juggernaut, the company is highly influential — which presents trading opportunities on both sides of the table. That’s where financial services provider Direxion jumps into the fray.

For optimistic investors, the Direxion Daily QCOM Bull 2X Shares (NASDAQ:QCMU) tracks 200% of the daily performance of QCOM stock. On the other end, the Direxion Daily QCOM Bear 1X Shares (NASDAQ:QCMD) provides 100% of the inverse performance of the namesake equity.

In both cases, the primary selling point is convenience. Typically, those interested in leveraged or inverse positions must engage the options market. However, certain derivative or synthetic strategies carry complexities which may not suit all investors. In contrast, Direxion ETFs are straightforward, debit-based transactions, functioning very much like any other publicly traded security.

Still, familiarity does not mean risk-free. For one thing, leveraged and inverse funds tend to be more volatile than standard vehicles tracking benchmark blue-chip indices. Second, while Direxion ETFs don’t expire per se, they do have administrative nuances to watch for, such as the possibility of illiquidity. Finally, do keep in mind that these funds are designed for exposure lasting no longer than one day.

The QCMU ETF: One of the fresher Direxion ETFs, the QCMU bull fund made its debut in late June of this year. So far, it has gained 3%.

• While the overall performance isn’t great, QCMU is a trading vehicle. For example, in the seven weeks starting from Aug. 11, the bull fund gained over 28%.
• Currently, QCMU is riding the 50-day moving average. Conditions look auspicious, with accumulative volume rising since the beginning of September.

The QCMD ETF: Since its debut, the QCMD ETF has lost a little over 2%. However, much of its utility rests on timing considerations.

• In prior sessions, broader skepticism over AI and other high-flying sectors has seen QCMD rise in value.
• Interestingly, although the inverse fund is currently in a rough spell, acquisition volume has jumped, suggesting growing interest in the bear trade.

Featured image by Monoar Rahman Rony on Pixabay.