Market Overview

It's Almost Time For These Leveraged Media ETFs

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It's Almost Time For These Leveraged Media ETFs

The market is in the midst of second-quarter earnings season. This week, the bulk of reports are coming courtesy of blue-chip companies, but traders waiting on more exciting growth fare will not have to wait long.

What Happened

For the week starting Monday, July 22, over 60% of the Communication Services Select Sector Index (IXCTR) report earnings. That presents active traders with significant opportunities to tap the Direxion Daily Communication Services Index Bull 3X Shares (NYSE: TAWK) and the Direxion Daily Communication Services Index Bear 3X Shares (NYSE: MUTE), two of the new leveraged exchange-traded funds in the Direxion stable.

The bullish TAWK attempts to deliver triple the daily returns of the Communication Services Select Sector Index while the bearish MUTE looks to deliver triple the daily inverse returns of that benchmark.

Why It's Important

Anxious traders can give TAWK or MUTE a run right now. Netflix, Inc. (NASDAQ: NFLX), which represents 4.51% of the Communication Services Select Sector Index, reports earnings this week.

Additionally, on the bearish side of the equation, Facebook Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG) and several other tech giants, are under political siege at the moment.

On Tuesday, Senators grilled Facebook on its monopoly status and its Libra cryptocurrency plans. Alphabet has been dinged for politically biased search results with tech investor Peter Thiel, a Facebook board member, alleging that Alphabet is “treasonous” company that has been infiltrated by Chinese spies.

So yes, TAWK and MUTE are useful for active traders right now without having to wait until next week's earnings avalanche from the communication services sector.

What's Next

Fund flow data indicate TAWK and MUTE have been docile, but that is a scenario that could turn on a dime with big-name earnings reports looming. Still, traders should approach TAWK and MUTE as they would any other leveraged ETF: as short-term instruments. Over the past month, TAWK is up 20%, indicating the underlying sector could be ready for a pullback.

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