Papafox's Daily TSLA Trading Charts

[austinEV]

Great analysis papafox. You nailed my thoughts. We might trade flat to down into the ER. The ER is nominally a risk so people could get out beforehand. Here is the ER bet it represents:

Bad scenario: They show a modest EPS loss, or a bigger loss if the SCTY bogeyman is bad. Guidance is wishy-washy and there just isn't anything exciting justifying the recent runup. Stock drops 7% the next day and revisits a support point of (pick your technical support level). But by mid summer real deliveries or positive news of the M3 causes more support and real shipments in 2H puts us back in these levels by fall ready to go to ATH on, at the very latest, actual bottom line contributes from M3 shipments.

Good scenario: There is a modest EPS profit. The SCTY activity is actually profitable because they switched heavily to cash sales and/or they sold off debt. They sold a few ZEV's maybe. They give upbeat guidance-- 100k S/X and reaffirm Q3 shipments for M3. 30k for the year? I think the market is poised with a positive bias for this ER. The recent run up predicts a good result. They WANT to see good, in stark contrast to the Q3... Q3 was objectively great and the market was biased to hate it. Any positive EPS would be a received as "real" and a smash success. +7% the next day, and shorts start to capitulate. We see 320's in short order and 300 becomes a support level.

 

[Cattledog]

I choose the good scenario. Mostly from an 'it's about time' viewpoint. I also think Elon wants to make things go and he knows the catalysts: Model 3, Tesla Energy (storage + roof), Ridesharing. Model X+S are now the baseline. Think about that statement.

 

[adiggs]

...

Conditions:
* Dow up 92 (0.45%)
* NASDAQ up 19 (0.32%)
* TSLA 280.98, up 0.38 (0.14%)
* TSLA volume 7.2M shares
* Oil 53.20, up 0.27 (0.51%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: 127,000 drawdown, rate 0.75%, down from 2.00%

The Fidelity interest rate caught my eye - when I see a move, I go check, and I'm still showing my shares as being lent out at 1%. Clearly that is an unstable economic situation - Fidelity either has to charge > 1%, or they'll be returning my shares any moment now.

My read is that there's a lessening of demand to be short (relative to supply). I can't translate that into absolute demand (are the total number of shares short lower today than they were a week ago), but relative demand is subsiding.

 

[GoTslaGo]

Thanks for the info. My iphone app has given some flaky numbers lately on volume. Today was the first day I was tempted to use one because it looked somewhat reasonable. My bad. I was able to correct with Yahoo finance numbers in time on the original post. Yahoo has just become my volume source going forth. Thanks again, ggr!

Yes watch out for the IPhone/IPad cache-ing (is this a word?) of data. I was looking at the NASDAQ charts for another stock we were interested in trading. The weekly looked like a really bullish pattern, so we put the trade in. Unfortunately after it filled the next day, I realized that my IPad had cached the NASDAQ site BEFORE the close. When I refreshed it, it was a totally different, more bearish pattern. Ugh... Still holding that one, hoping it breaks out of its range...

Learned my lesson. I do my final analysis on the desktop, and/or make sure everything is refreshed.

 

[Papafox]

Today was another consolidation day for TSLA. The good news? Take a look at the technical chart and you can see that TSLA has now descended back below the upper bollinger band. That upper bb has worked as a tractor beam to pull TSLA back into its grasp every time TSLA has ventured higher. That's not to say that we won't see a breakout some day that leaves the upper bb far behind. Rather, it is to say with the current SP, news, and catalysts, TSLA is strongly influenced by this upper boundary.

Here's more good news. Check out the trading today, where we saw a morning dip below 277 and an afternoon dip below 278. In the bad old days, these dips would have likely been the start of a swan dive in which the SP makes a considerable drop below the recent high. With the 4Q ER ahead, though, TSLA longs aren't panicking when they see the SP dip. We actually saw nice recoveries following both these dips, which would make those waiting for "the inevitable dip" think twice. Again, these statements are about the current environment. The environment can change quickly if bad news comes over the wire, so take these statements with a grain of salt.

Where do recent events and trading leave us? We're at the intersection of two points of view. One is the Ron Baron point of view that TSLA will be worth four times its current value some time in 2020, and major increases in value take place in subsequent years, too. The other point of view is that TSLA has recently run up more than 50% and a pullback is going to happen at some point. The positive or negative catalyst everyone is looking at right now is 4Q ER and guidance. I embraced both these views by moving out of short-to-mid-term trading and into shares and leaps. Are you going to be happy if TSLA zooms higher 1 minute after the 4Q ER is released? Are you going to feel distraught if TSLA drops 20 points soon after the ER? If so, please consider finding middle ground that works for you because the 4Q ER remains an unknown at this point. What you think you know about TSLA stock behavior may be wrong at the moment because TSLA is behaving differently than in the recent past. Now's a great time to refresh your perspective.

Conditions:
* Dow up 107 (0.52%)
* NASDAQ up 37 (0.64%)
* TSLA 279.76, down 1.22 (0.43%)
* TSLA volume 4.9M shares
* Oil 53.03 down 0.08 (0.15%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: Net (covering 513,000 shares), 2.00%

 

[adiggs]

...
* Morning's Fidelity short share drawdown or (covering) and interest rate: Net (covering 513,000 shares), 2.00%

As "predicted", Fidelity's rate for borrowing TSLA from them jumped immediately back to 2% (I would treat yesterday's 0.75% reading as an anomaly and not read anything into it).

 

[Papafox]

Today we saw profit-takers rule, and investors waiting for a dip are breathing a sigh of relief. Overall, net covering took place with the shorts, which reduced downward pressure to a small extent. We mostly see big dog shorts covering with hundreds of thousands of shares while the new short positions are much smaller positions. The good news is that the big dog shorts are the one who have done the manipulating in the past and they're bowing out, one by one.

TSLA continues to be unpredictable in the short run. Level consolidation has moved today into downward consolidation. We should see continued uncertainty leading up to the Q4 ER, and the results of that ER will give TSLA a direction to head in the short term. Unless Musk mentions concerns about Model 3 timetable at the ER, the long term for Tesla remains bright. Much of today's hit could possibly be due to the RBS note that says there has been no substantial news to justify the runup. The obvious response to the RBS position could be that the combination of the gigafactory beginning cell production and the Q4 delivery numbers showing a robust production rate and demand have given big investors the confidence they needed to buy in over the past few months in to prepare for the coming years of TSLA appreciation.

One interesting observation was the apparent disappearance of 600,000 shares to short at Fidelity today. My take is that Fidelity is rationing available shares to short for three reasons. First, they can get a higher interest rate if the supply of shares to short is limited. Secondly, they can limit defaults in the event of a squeeze if they limit their exposure to the number of their short shares outstanding. Thirdly, Fidelity funds are long on TSLA, and reducing the short-term volatility of the stock by rationing available shares to short works in the best interest of their funds holding shares of TSLA. I know the two sides of Fidelity are not allowed to talk to each other about such things, but I suspect that Fidelity will continue to be cautious in the number of short shares they make available at any one time.

Conditions:
* Dow up 8 (0.04%)
* NASDAQ down 5 (0.08%)
* TSLA 268.95, down 10.81 (3.86%)
* TSLA volume 7.0M shares
* Oil 53.43, up 0.32 (0.6%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: (282,000 net covering), 2.00% interest

 

[Navin]

One also thing to consider is that TSLA was extremely overbought based on an rsi basis. Over 70 - overbought. Under 30 - oversold. Look at the chart in Apple for example -- it's super overbought right now and will likely retrace several % over the next week or so. Watch and circle back here if I'm right on this.

 

[neroden]

It's worth remembering that short-term traders, *especially* including bots, look at these technical signals, so even if you consider many of them fundamentally meaningless (as I generally do), there's a lot of self-reinforcing prophecy going on. Whichever technical signals are most popular among the biggest, most active bots WILL have an effect.

So for instance we know that a lot of traders (and bots) look at the RSI and at the Bollinger bands... so we should expect them to predict accurately a lot of the time.

 

[Papafox]

A lot of the time market makers will request shares to borrow daily, and they will not plan to use them or know if they will be using them or not, they just line them up in case they will be needed to provide liquidity.
This generally only happens in the morning though, so I don't think it would apply here. Looks like a very large momentum short to me.

I thought this message in the market action thread was particularly educational regarding the discussion we've been having about the disappearance of shares to short at Fidelity.

 

[Papafox]

Today the consolidation continued, but in a positive direction. We close today in a very healthy location in the bollinger band, not crowding the bottom but leaving lots of headroom above.

This will be a three-day weekend, and with a positive trajectory of the stock price (both being up today and closing with upward momentum, I would expect positive trading during the first hour on Tuesday morning, if the macros and news cycle allow. Beyond that, it's a guessing game. With ER on Wednesday, we typically see negative trading on ER day as profit-taking occurs. Let's see if TSLA follows traditional paths this coming week.

Conditions:
* Dow up 4 (0.02%)
* NASDAQ up 23 (0.41%)
* TSLA 272.23, up 3.28 (1.22%)
* TSLA volume 6.3M shares
* Oil 53.4, up 0.04 (0.07%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: 86,000 shares borrowed, 1.75%, down from 2.00%

 

[Papafox]

For the week, TSLA climbed from 269.23 to 272.23, up exactly $3. With the big loss on Thursday, it's hard to imagine that we closed up this week, but we did. The uptrend channel is not dead. It's just preempted by positioning for the Q4 ER results, upon which it will decide whether to resume the climb or take steps backwards while awaiting further developments.

 

[Papafox]

Today was a positive trading day for TSLA as it added substantially to Friday's small gains. Broader markets were up substantially. The near-vertical climb shortly after market open suggests there's still panic buying taking place, both buying by shorts fearing a huge run-up and buying by longs fearing being left behind in a huge run-up. Fidelity's short numbers suggest the panic buying was mostly done by longs today. After the peak climb, TSLA settled a bit, as expected, but it maintained most of the day's climb after leveling off, which tends to be typical, as well. The first hour of trading after a three-day weekend certainly didn't disappoint.

Looking at the technical chart, you can see that even at its high today, TSLA remained within the confines of the bollinger bands and could run up tomorrow or the next day to 285 before it starts crowding the upper band. If the ER and guidance are particularly good, the upper bb would not likely constrain the resulting run-up, however, because the catalyst would be great enough to overrule the influence of the bb.

I'm constantly looking for new trends in TSLA trading. One trend is that longs do not get significantly fearful when TSLA price drops. We've seen this trend for a couple months now. The big Thursday drop would normally generate additional days of drop in the past, but instead we saw a small rise on Friday and a bigger rise today. Here are three explanations of what may be going on:

The optimistic explanation- TSLA longs for the most part believe that Model 3 will arrive in 2017 and that the stock price will climb above 300 (and may go noticeably higher if shorts start jumping ship en masse). Consequently, they don't sweat the dips, they're optimistic about the year and this optimism is driving the stock higher.

The pessimistic explanation- The approaching 4Q ER provides some comfort to TSLA longs because many believe that the ER and/or guidance will propel the SP higher. Once the ER comes and goes, this crutch is lost, and TSLA will trade in a more normal fashion, with more room on the downside, particularly if the downtrend begins as the ER results are released.

The optimistic response to the pessimistic explanation- If the approaching 4Q ER has provided some reassurance to TSLA longs, then the 1Q delivery numbers and ER will provide substantially more reassurance to TSLA longs if Musk and Wheeler give some hint of just how good a quarter lies ahead. If this hint is given, then the 1Q delivery numbers and 1Q ER take the place of the 4Q ER as a stabilizing mechanism for the stock during potentially negative times. Ultimately, volume production of Model 3 will provide a much stronger support mechanism than any ER, and we may see this optimistic trading extend well into 2017.

Historically, we see profit-taking on ER day. Will we see the traditional dip tomorrow, or is the optimism sufficient to counteract it? Stay tuned.

Conditions:
* Dow up 119 (0.58%)
* NASDAQ up 27 (0.47%)
* TSLA 277.39, up 5.16 (1.90%)
* TSLA volume 5.6M shares
* Oil 54.35, up 0.02 (0.04%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: 123,000 and 1.75% interest

 

[Papafox]

So, the question during market hours was optimism vs. profit-taking on ER day. If you looked 5 minutes after market open, optimism ruled, but for most of the rest of the day, the profit-takers carried the day. The real drivers for the opening were lots of buyers using the "buy on open" feature, and lots of sellers using the "sell on close" feature. More than 200,000 shares traded hands in each minute. Food for thought: it is probably best to avoid using that buying or selling technique on ER day.

Similarly, was this an ER to send the SP up or down? Initially, word of the Model 3 being on time sent it up after hours, but the gains were diluted as hard questions were asked about earnings and cash burn. Margins and profits were lower in Q4 than in Q3 but the letter expects margins to improve in Q1 and even more in Q2. There's room for both bulls and bears to make a case for the short term, but bulls definitely win the prize for long-term 2017 potential alluded to in this ER. Looks like we're going to have to wait until tomorrow to see which camp carries the day for short-term trading, but long-term still looks very good. I continue to feel bullish about the Q1 delivery numbers and ER, but I'm mostly positioned for the long run, as it is the safest bet at this point.

I thank Familial Rhino for the link to the Mark Spiegel vs. James Albertine and Ben Kallo tag-team Tesla opinions wrestling match on CNBC. The only thing that would have made it better would have been Andrea James on the Albertine/Kallo team and watching Andrea get Mark in the dreaded scissors lock. Albertine's "Tesla will be the iphone of electric vehicles" comment was the equivalent of a flying eagle leap off the ropes and onto the opponent. In case you missed it from the market action thread, check it out here.

Conditions:
* Dow up 33 (0.16%)
* NASDAQ down 5 (0.09%)
* TSLA 273.51, down 3.88 (1.4%)
* TSLA volume 8.7M shares
* Oil 54.01, up 0.42 (0.78%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: 47,000 shares drawdown, 1.75%

 

[Papafox]

Away from computer today, discussion to follow in separate post.

Conditions:
* Dow up 35 (0.17%)
* NASDAQ down 25 (0.43%)
* TSLA 255.99,, down 17.52 (6.41%)
* TSLA volume 14.8M shares
* Oil 54.36, down 0.09 (0.17.%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: 23,000 shares drawdown, 1.75%

 

[Papafox]

Today we saw the market get nervous about the 4Q ER. A few issues were particularly problematic, when seen over a period of time. Elon's statement of TSLA will be running close to the edge of available cash with the Model 3 ramp was concerning, especially with the statement that an equity raise is now likely. Until that raise takes place, TSLA will suffer from the perception that money is needed but not yet raised. This situation would become more acute should some financial shock hit Wall Street before the funds are raised. Once the funds come in, expect a rebound.

The other touchy issue is the departure of Jason Wheeler. If he announces that he has taken some high position in government, then his explanation would be accepted and we'd see a bump up in the SP. In the meantime, one form of speculation is that Wheeler and Musk disagreed upon an important point, and it was a big enough point that this disagreement led to Wheeler's departure. Wheeler has shown restrain in spending and a generally more conservative strategy than Musk, and so the assumption would be that Elon wants to do something that made Wheeler feel uncomfortable, and Wheeler announced his departure. Let's hope we hear something positive about Wheeler's immediate plans, so that we can erase the idle speculation.

The fact that Q4 was softer than Q3 is an issue, too.

So, IMO, the combination of Wheeler's departure and the need for an equity raise but no word of when that raise will come has put the jitters in the bellies of some investors. Fortunately, a good Q1 should put the concerns about Q4 behind Tesla. We have about 5 weeks to wait for Q1 delivery numbers. Let's hope the positive catalysts begin before then and the delivery numbers add to the positive developments.

 

[neroden]

The other touchy issue is the departure of Jason Wheeler. If he announces that he has taken some high position in government, then his explanation would be accepted and we'd see a bump up in the SP.

I'm inclined to believe Wheeler. "Public policy" doesn't necessarily mean government position, it can also mean lobbying or think-tank, so if you find him at the head of, say, SEIA (Solar Energy Industries Association), that would indicate he was telling the truth.

 

[GoTslaGo]

Regarding the equity raise. Oftentimes I think Elon can be honest to a fault.

Maybe instead of saying "to de-risk the M3 ramp, Tesla should/likely do an equity raise" (to paraphrase), he could say: "when the timing and circumstances are right we may do an equity raise..."

And instead of speaking of the obvious GM negative M3 with the first M3 (which is an awful sound-bite), he could just give the ultimate goal/target GM for M3, or just defer the question.

But then again, if he became so slick, he wouldn't be Elon...

 

[Papafox]

I'm inclined to believe Wheeler. "Public policy" doesn't necessarily mean government position, it can also mean lobbying or think-tank, so if you find him at the head of, say, SEIA (Solar Energy Industries Association), that would indicate he was telling the truth.

One thing's for sure, with a resume that shows Chief Financial guy at Google and Tesla, Wheeler can go just about anywhere he wants to.

 

[Papafox]

Today TSLA investors indicated that we've bottomed out for now. The stock closing up for the day and with slight positive momentum at close should help with a positive opening on Monday morning, should macros and news allow.

What investors crave at this point is de-risking. News of Model 3 being on time provides some de-risking, but a Q1 result that improves on 3Q16's financial results would be highly welcomed and de-risk the stock by showing progress toward profitability. Much of the recent run-up in the SP came about following Q4's delivery numbers, which were below expectations but word of production numbers and vehicles in transit painted a much brighter picture. If Q1 delivery numbers come in significantly above Q3 and Q4's numbers, then the stock is positioned to resume its climb. Production level looks good, vehicles are sold out well into Q2 now, so demand is not an issue, and the quarter's pause at the factory is apparently being made up with additional production days. Thus, I remain bullish about a catalyst in early April, which is 4-5 weeks away.

The other substantial de-risking event would be a successful equity raise. With TSLA still priced at an attractive number for a raise, why hasn't Elon done so yet? My guess is that he expects the SP to go up from here and Q1 or Q2 results will provide the reason for the climb. Since waiting until after the year is half over makes the raising of equity rather scary in terms of the low cash position for the stock at the time, I suspect Elon will either use the runup from Q1 deliveries and ER as the elevator for raising the SP prior to looking for more money, or use these events as incentive to equity raise buyers that appreciation is coming soon (and thereby selling before Q1 delivery numbers and ER), or splitting the difference and using Q1 delivery numbers to raise the SP and then do the equity raise prior to the Q1 ER (to provide upside potential to the stock to the equity buyers). In any event, if he felt that Q1 would be a disappointment, I really believe that the equity raise would be done by now. As long as he holds off on the equity raise, I remain confident that Q1 is going to be good. Once the money is raised, we should expect an increase in the SP because the dilution at such a high SP is minor compared to the benefits of an extra billion in the bank prior to the beginning of Model 3 roll-out.

For the week, TSLA closed at 257.00, down $15.23 from 272.23 last Friday.

Conditions:
* Dow up 11 (0.05%)
* NASDAQ up 10 (0.17%)
* TSLA 257.00, up 1.01 (0.39%)
* TSLA volume 8.1M shares
* Oil 54.02, down 0.43 (0.79%)
* Morning's Fidelity short share drawdown or (covering) and interest rate: Not available