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Yesterday, with positive macros, efforts to push TSLA below 200 for the close had failed for the 3rd day in a row. Daily declines had sunk to near zero. Nonetheless, we live in interesting times and such a flurry of FUD came forth today on a day with negative macros that TSLA sank below 200. With that support breached, it was an easy fall to the 192.xx closing price today. Here's how the day shaped up.
Initially, the pre-market dip and a tiny MMD were erased very quickly with a nice rise that nearly reached 204 at 9:36am. Remember how deep the MMDs had been the previous two days? Traders were standing by to buy the MMD today and break the pattern, which they did. Unfortunately for them, an entirely bigger problem popped up, which was the combination of negative macros and a tidal wave of FUD.
The FUD
You may take the view that all of these stories appeared "coincidentally" today, and you have a right to your opinion, but personally, I think it's far more likely that these articles (or most of them, at least) were intentionally positioned in order to reinforce TSLA's fall. Here they are:
* Adam Jonas of Morgan Stanley held a private discussion with investors today (and then allowed the contents of the discussion to be disseminated widely). He couldn't have been more negative: “Today, supply exceeds
demand, they are
burning cash, nobody cares about the
Model Y, they raise capital and there’s no strategic buy-in. Today, Tesla is not really seen as a growth story. It’s seen more as a distressed credit and restructuring story.” Nobody cares about Model Y? Burning cash? What fortune teller is Mr. Jonas visiting to come up with these answers?
Here's a Bloomberg account by Dana Hull of the session. This truly looks to my eye like an unhappy Adam Jonas who was upstaged by recent Cathie Wood comments and he's extracting his vengeance this week while trying to reestablish himself as the premier expert on Tesla and autonomy. His comments are clearly over the top, however.
*
An analyst with Citi Research downgraded TSLA today and said there's increased risk that the stock could drop as low as $36 a share.
*
Consumer Reports jumped into the fray with a report that lane changes in Navigate on Autopilot were dangerous. I am not aware of any accidents caused by lane changes in NOA, but the writer focused on changes in which there is a vehicle rapidly approaching in the lane which will be used for passing. I have been allowing NOA to make automatic lane changes that I approve of in my Model 3, but the article leaves out important details such as some torquing on the steering wheel by the driver's hands is needed to signal to the autopilot that it has approval for the lane change. I simply don't give the approval if I feel uncomfortable about the situation, but that important piece of the puzzle was not included in the article. The article also neglected to mention that in vehicles with autopilot engaged, Tesla has seen a doubling of safety in the driving. What's at work is a system that is learning from real-world experiences but that is safe as long as the driver continues to monitor the situation and confirm that it is safe to proceed.
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The broader markets were down today with NASDAQ losing 0.45% at day's end. You can see NASDAQ dips at 11:15am, 1:20pm, and in the final minutes heading into market close.
At end of day,
a more-balanced article came out from Gene Munster's group. Munster is concerned about the tariff war with China and has lowered his expectations of Tesla deliveries in 2019 to 310,000 vehicles (Tesla has guided for between 360K and 400K). Munster suggests as long as Tesla delivers at least 300K vehicles a year in 2019 and 2020, the present cash situation will last for 2 years. If you compare his somewhat conservative position to that of Adam Jonas, you would wonder if the two are talking about the same company.
Here's a bullish analyst, Joseph Osha from J.P. Morgan,
explaining on CNBC today why he is keeping his high price target and buy rating intact.
Finally, someone in the financial community spoke up and said that this recent drop of Tesla's stock was primarily the work of TSLA short sellers, who have increased their short interest to over 31% of the float. The unlikely source of
this story is Bank of America. Go figure.
Note regarding percentage of selling by shorts: the posted percentage of FINRA selling by shorts today was about 40.25%, but the daily charts suggests significantly high levels of short-seller manipulations today. For example, the 12:30pm dip showed nearly 80K shares traded in a 2 minute time span, while the 3:10pm dip shows about 200K shares sold in a 7 minute timespan. Mercy! This is not how institutional holders unload. They do it slowly so as to have the least negative effect on the stock price. Shorts, on the other hand ...
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The tech chart shows the very significant dip of TSLA once 200 fell. The lower bb is just playing catch-up to the stock price and has not offered any real support for some time now.
Where does TSLA go from here? We've heard that 180 would be a strong support for the stock, and it's entirely possible that the stock could make its way down to this number. At some point, whether at 180 or some time before, the market will realize that TSLA has been oversold and TSLA could enjoy a nice bounce, as the Bank of America story suggests. So many of the FUD stories of the past week, the $10 bottom of Morgan Stanley's worst case scenario and the $36 bottom of the Citi article, are designed to scare investors and distract them from the 180 support level. What we have right now is a case where investors are wary about catching falling knives and then a possible support level is breached and the SP falls further. If you have dry powder, I would suggest hanging loose, too, until a more solid turnaround is confirmed. Since many investors are using this approach, a further descent to 180 becomes all the more likely. We are in the midst of a FUD, short-selling, and media "sugar"storm that has been unprecedented with Tesla so far.
In the meantime, keep an eye on Tesla's execution. From deliveries in North America and the number of ships heading to China and Europe, Q2 looks fairly reasonable so far. Although the number of Model S and X buyers who have received their Raven-enhanced refreshed versions of these vehicles had been fairly low in the past, I've seen a significant upturn during the past couple days in buyers reporting that Tesla is ready for delivery. At long last that logjam appears to be clearing. Check out the threads for yourself at:
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Model S delivery thread
*
Model X delivery thread
Conditions:
* Dow down 101 (0.39%)
* NASDAQ down 35 (0.45%)
* TSLA 192.73, down 12.35 (6.02%)
* TSLA volume 18.3M shares
* Oil 61.31
* Percent of TSLA selling tagged to shorts: 40.5%