Friday was a big down day for the macros and TSLA followed them down with significant correlation. A dip of 3.5% for TSLA when the NASDAQ is down 2.5% is rather typical, but the frustration for us longs is that TSLA has not be running up with such multiplier effect on good NASDAQ days. Volume of 8.7 million shares traded suggests Friday's red ink came about not so much because longs were trying to get out, but rather that buyers were sitting on the sidelines, waiting for exceptional deals before getting back in.
I'll be very curious to see some short interest numbers soon, as my traveling has made my normal "short sight" email unavailable for a few days, but I'm inclined to believe that short interest has been climbing, which is typical when TSLA is in a perceived funk and the likely outcome will be that shorts will have bought in right near the bottom and will lose considerably once the recovery comes about. TSLA was already showing a propensity to recover this week before the macros went south on us.
Despite these current stock prices being very attractive for entering new long positions, there are emotional reactions among certain investors that kick in about now and sometimes defeat the logical "time to buy" decision. Moreover, the news right now is mostly positive.
Elon's attorneys just filed their reply the to SEC's reply, and the arguments presented look extremely strong. Word of exceptional deliveries in Europe keep coming in and deliveries on the east coast are finally looking good as the cars reach that sector. Nonetheless, Consider what might be generating negative emotional reactions to TSLA right now:
* When stock prices are down, the media ups their pressure, feeding off the worry of a low stock price. When a writer can add "Tesla is down 13% this year" to their story, that number provides some justification for making all sorts of bad calls about the company. True to form, the New York Times'
Neal Boudette released an intentionally inaccurate piece about Tesla's U.S. deliveries in February deliveries way down from previous deliveries, but fails to mention that in February all Tesla vehicles manufactured were accessorized for European or Chinese deliveries and the NYT article was citing U.S. delivery data.
* When the stock price is down and big news outlets such at the NYT print inaccurate stories that intentionally paint Tesla in a bad light, small, gullible and uninformed shorts jump in and short interest increases at a time when such positions are almost certain to cost their holders money in the not so distant future.
* Manipulations by the big shorts typically increase at low stock prices when a downtrend is present because as long as there's a downtrend, there's a likelihood of profits in the manipulative trades themselves.
* Long investors, who may be a bit rattled from the constant downward pressure on the stock, sometimes start to think that the stock price is low "because someone knows more than me". Typically, the reasons for the low stock price are something else entirely.
The good news is that Tesla looks to be delivering on their plan. The Shanghai factory is taking shape at an extraordinary speed, Model Y is now revealed and could become the fastest selling vehicle of all time when it reaches full production, reports of efficiencies and cost reductions abound, Elon has a very strong legal defense against the SEC's accusations, and as the final week of deliveries approach Tesla is processing the largest wave of deliveries the company has ever seen. Even if the macros decline in the coming year, TSLA has a reputation for shaking off the macros when news is good, and once the SEC controversy and worries about Q1 are put to bed, the recovery can begin in earnest.
Macros were down significantly on Friday, with the NASDAQ down 2.50%
Even with efforts by shorts to keep the percent of selling by TSLA shorts down below 41%, they just couldn't help themselves on Friday and the number rose to 46.5%
Looking at the technical chart, you can see the rather steep angle of the lower bollinger band means that the band is falling quicker than the stock price and therefore it is not offering a great deal of help right now to days with negative trading.
For the week, TSLA closed at 264.53, down $11 from last Friday's 275.53. I suspect there will be some positioning for the Q1 P&D report, and so we might see relief to the downward pressure before then. Quite simply, the dip has become emotional and has divorced itself from Tesla's current progress. We've seen these emotional dips with help from the short-sellers and FUDsters before. You just ride them out or you find spare change and add to your position when they come around. A one-two punch of Elon defeating the SEC charges plus a positive surprise with production and deliveries would do the trick. Have a good weekend.
Conditions:
* Dow down 460 (1.77%)
* NASDAQ down 196 (2.50%)
* TSLA 264.53, down 9.49 (3.46%)
* TSLA volume 8.7M shares
* Oil 59.04
* Percent of selling tagged to TSLA shorts: 46.5%
