- Jan 12, 2013
- 4,901
- 54,368
I'm so used to Tesla events on Wednesdays that I did indeed make that mistake about Battery Day. Tuesday it is!
I'm so used to Tesla events on Wednesdays that I did indeed make that mistake about Battery Day. Tuesday it is!
- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
Ah, the games they play. Both TSLA and QQQ were significantly low right before market open, but by 10:20ish TSLA had recovered to being down only 1.1% and QQQ was down around 1.3% at that time. Both charts show a dip to about 12:45ish, but the difference is that QQQ recovered throughout the afternoon and TSLA's recovery was extremely weak. No negative Tesla news of consequence came out during this time, and so the most likely explanation is that the option sellers saw the mid-day dip as a gift that would allow them to impede TSLA's recovery this afternoon and aid them in their end of week mischief. After all, it's easier to hold down a stock price that has been pushed down by macros than it is to push it down yourself.
Keep in mind that Friday is a quadruple witching options expiration day, and the option sellers have an especially strong incentive to pull TSLA lower on Friday. Also keep in mind that QQQ was down 1.56% on Thursday while the NASDAQ was down only 1.27%, thus making differences between TSLA and NASDAQ trading even more pronounced.
Unfortunately for the manipulators, good news popped up late on Thursday, with Piper Sandler raising its' TSLA price target from 480 to 515 per share. Analyst Alex Potter noted that Tesla Energy is going to be a bigger contributor to Tesla's revenues going forward. He also mentioned that even though compensation for Elon Musk will be seen in coming quarters, the total amount is already known, and is therefore workable. Again, I'd like to point out that Q3 makes great sense for starting to show profits from the "Net Operating Loss Carryforwards" that will more than balance out the negative effects upon GAAP profits from Elon's stock awards.
As more analysts start waking up to the potential of Tesla Energy as Battery Day reveals tremendous future battery production capabilities and better economies, other price target increases will materialize. I continue to believe that next Monday and Tuesday should show an uptick in TSLA buying as investors position for Battery Day, particularly with the discount provided by these end of week manipulations. If the option sellers succeed in pushing TSLA lower Friday afternoon, I'll likely jump in and bet on "Marvelous Monday" and "Battery Day Tuesday" bumps. I typically do my bets with In The Money leaps, so if I bet wrong I just hang onto the leaps until they are profitable.
Looking at the tech chart, you can see that although TSLA dipped below the mid bollinger band during the day, it still close above the band.
Conditions:
* Dow down 130 (0.47%)
* NASDAQ down 140 (1.27%)
* TSLA 423.43, down 18.33 (4.15%)
* TSLA volume 75.5M shares
* Oil 40.97
* Percent of TSLA selling tagged to shorts: 37%
- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
As we last left off, TSLA rose on yet another Monster Monday, followed quickly by a Tremendous Tuesday that built upon those gains. To no one's great surprise, these trading days were followed by Weak Wednesday as TSLA gave up ground to weak macros and then Manipulator's Thursday in which TSLA lost far more than the macros as option sellers pulled TSLA down at more than a 2X multiple to the NASDAQ in an effort to set up Friday for a further pushdown on a Triple Witching Options Expiration day. I stated that I planned to buy Friday afternoon at the low in order to play the Friday to Monday trade and the anticipated buildup to Battery Day trade (keep in mind my trades are a very small portion of my TSLA holdings, the majority of which are just HODL holdings that change in leverage over time).
I almost laughed out loud when I saw Friday morning's trading. Despite a NASDAQ that sagged well into the red after 11am, some big dog was lapping up shares prior to Battery Day, like there was no tomorrow. I think it became obvious to the big dog(s) that traders such as myself were ready to buy in Friday afternoon to take advantage of a run higher on Monday, and so they did the logical thing: they beat us to the punch. That's okay, my core shares did well. At about 2pm, after the NASDAQ had bottomed out with a dip around 2.7% and TSLA was still well in the green, I bought a trading leap for Monday's expected rise. Lately I've been buying as early as 2pm on Friday's to beat the traders rushing in to buy during the final hour. That flurry of late Friday buying did indeed come as TSLA flirted with 450 12 minutes before market close. From there on, the option sellers sold hard to sink TSLA in the final minutes. Notice there was no news nor macro movement to justify the dip.
Looking at volume, we saw no less than 2.6 million shares trade during first minute of market trading and nearly 5.5 million shares trade during the 4:00pm minute. Mercy! I think the big 4:00pm buy was likely led by market makers and other option sellers who manipulated the stock down in the final 12 minutes and then tried as hard as possible to buy back at 4:00pm to get closer to delta-neutral. I suspect they are still in need of some buying to get delta-neutral and so we may see some upward pressure from delta-hedge buying Monday morning. Overall volume was rather light at 84 million shares traded, particularly in light of TSLA's 4.4% climb. Interpretation? Investors weren't in a hurry to sell and so a large price increase on a day with negative macros was needed for the big dog(s) to buy a substantial number of shares prior to Monday. Needless to say, unless macros are really in the dumpster on Monday I suspect TSLA rises nicely.
All eyes are on Battery Day, which begins after the Tesla Annual Meeting on Tuesday. Although a majority of events at Tesla have led to sell the news responses from the market, I believe the potential is there for the results of Battery Day to move the stock price higher. My overriding theory is that if there's a sale the news response, you just ride out the dip and TSLA goes up on other good news which appears to be coming soon (3rd and 4th quarter Production and Delivery Reports and ERs). There's also the wild card of S&P500 inclusion out there. If Battery Day turns out to provide enough material to plug into analyst spreadsheets and move the stock price noticeably higher, I want to be in, and someone sitting on the sidelines may never get another buying opportunity at this price point. There's no certainties with things Tesla, but when in doubt I get my best results with HODL for the long term.
* Rob Maurer did a good job here at previewing what may be coming at Battery Day
* TMC member @gabeincal did a great job here at showing the Fremont factory from a drone's eye view
One concern of some investors is whether TSLA is too far ahead of the NASDAQ after September's macro weakness. Here's how I see it. If you look at TSLA's stock price change from its August 31 high of 498 to its Friday close at 442, that's a dip of about 11.5%
If you look at the NASDAQ dip on those same days, the dip works out to be about 8.4%. In other words, TSLA's dip over those days is still greater than the NASDAQ's. Moreover, I think the exaggerated dip of TSLA in the first two days of September may have actually been a catalyst for the NASDAQ dip.
Coronavirus
Another concern of investors for the coming week is Coronavirus.
As you can see from the chart above, the past week has seen a momentum change in the U.S. from decreasing new cases numbers to increasing numbers. My guess is that much of this increase in new cases is due to college students being too lax about social distancing. As with other increases, I think the problem will be identified and corrected.
If you look at deaths in the U.S., the second wave included higher "new cases" numbers than the first, but the deaths bump has been considerably lower than the first wave. I attribute better treatments and better protection of the vulnerable elderly for this improvement.
Nonetheless, investors are looking at an outbreak in Europe as something to possibly worry about. Let's take a look at France and Spain.
As you can see, the second wave in France is still accelerating and is quite a bit larger than the first.
Nonetheless, look at how much better the deaths are being reduced during this second wave. Granted, the deaths follow the new cases by 3 or more weeks of time, so we have to wait a while to see the results, but overall the virus is being treated better in recent months than during the first wave. At least for this week, the deaths in France should not be a hindrance to the market.
Looking at spain, the second wave reached numbers similar to the first, but look at the drop off in new cases this past week. As we have seen elsewhere, new waves are met with new procedures for dealing with them, which can lead to a dip such as we see in Spain.
Overall, I am disappointed so far in the ability of world authorities to deal with the coronavirus. My disappointment focuses in particular on treatment options in the United States. Let's review the biases of the various parties:
Trump administration- The POTUS has placed his biggest bet on a viable vaccine. With billions paid up front to get manufacturing underway even before a single vaccine has been proven safe, the strategy is apparent and has a reasonable chance of working. Nonetheless, the bias would be against therapeutics that treat active cases because the POTUS scores political points if it turns out that a vaccine and not an inexpensive and readily available combination of drugs wins the battle.
Democratic opposition- The Democrats don't want a vaccine approved and offered to the American people before the election. Some of the concerns are justified, in that we don't want to see a vaccine in the wild that has serious side effects. The other side of the concern is simply politics at work, trying to introduce fear of vaccines. At some point, they're going to have to undo that induced fear, which is not a good thing. Fortunately, the major U.S. vaccine makers utilize independent groups of experts who control the safety of the vaccine trials. The vaccine isn't proclaimed safe until the independent groups weigh in. Neither the POTUS nor the CEO of the company can hurry the vaccine beyond the pace the groups over overseeing experts wish to see, and so fears of a "rushed" vaccine are likely overstated.
The FDA- Here's my biggest disappointment. When it comes to testing, the FDA tends to err on the side of avoiding false negatives. Some of the molecular tests are so amplified that they're producing false positives as tiny bits of material from a prior infection are exaggerated to the point of showing a positive result. Most of these tests are somewhat expensive and require days before the lab has the verdict. A better approach in my mind would be cheap, readily available home tests that could yield an answer in 15 minutes. We see a number of both saliva and nose swab tests developed, but we're not seeing FDA approval of these tests. My guess is that they're not as sensitive as the other tests (which not-so-coincidentally are the primarily the products of big pharma) and they might only catch 90% of cases. Guess what? As long as the limitations of these tests are known, 90% is good enough for everyday testing. The speed of the testing is key and can eliminate a lot of transmission. The speed of catching cases early is particularly important when combined with my second point.
The second FDA bias is in favor of big pharma. We're seeing hugely encouraging small studies get ignored because they're not backed by big pharma. One group is the studies of HCQ, Zinc, and Azithromycin to treat at risk individuals who have just contracted the disease. If the disease can be stopped before the storm battle in the lungs begins, this disease becomes manageable. Unfortunately, we don't see follow-up major trials to confirm the findings of small studies, and since the medical community insists on the big, double-blind studies as the gold standard, promising treatments that don't involve big pharma don't get moved into mainstream use in the U.S. A second highly-encouraging discovery is that a type of highly-potent Vitamin D has been shown in a small study in Spain to hugely cut the number of patients who progress to the ICU. Here's the sensational version of the study and here's the more scientifically-oriented version.
If one of the vaccine candidates proves safe and becomes available within the next couple months, then it's likely game over for the coronavirus as those taking the vaccine will likely be of sufficient numbers in time to provide herd immunity to the population. In the meantime, I continue to be frustrated with the unreasonable avoidance of reproducing promising small studies so that we can confirm that inexpensive and potent treatment options are available. When you combine these treatment options with inexpensive home test kits, the end of coronavirus would be at hand. Too many of the FDA and other government decisions are too heavily skewed in favor of big pharma and away from promising less-profitable solutions.
Looking at the tech chart, you can see TSLA having returned well within the mid-bollinger band to upper-bollinger band range.
For the week, TSLA closed at 442.15, up 69.43 or 18.6% from last Friday's 372.72. It's been a great week and I hope you've enjoyed your weekend. Snug up the seatbelt because Battery Day is coming Tuesday.
Conditions:
* Dow down 245 (0.88%)
* NASDAQ down 117 (1.07%)
* TSLA 442.15, up 18.72 (4.42%)
* TSLA volume 84.4M shares
* Oil 41.11
* Percent of TSLA selling tagged to shorts: 37%
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- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
TSLA's momentum from Friday was apparent in pre-market trading as QQQ ran red but TSLA still managed to be flirting with, and sometimes exceeding 450. At 10:20ish TSLA dropped more than 8% on heavy selling that coincided with a mild dip by QQQ. From 10:20am until the bottom of the dip, QQQ dropped about 1.1%. My friends, what TSLA did was not normal trading. I suggest we saw a real effort to dip TSLA through manipulations that triggered algo selling and stop loss triggers, but by noon buyers had returned TSLA to the green even though QQQ was still well in the red. The rapidity of the recovery suggests a manipulated dip, and that's why the dip looks like a very sharp icicle.
The second big dip arose after hours around 5pm when Elon posted the following two tweets:
I suggest that Elon was trying both to get any potential negative perceptions of battery day out of the way early so that the message coming out of battery day would be a clearly positive one that isn't distracted by unreasonable expectations, and I think he was also signalling that battery cell partners will continue to enjoy a profitable partnership with Tesla as the company works to find enough cells to meet its demands through 2022.
The truth of the matter is that Elon swept away misconceptions with his tweets, rather than delivering any news that was actually bad.
I think @StealthP3D did a great job summing up the meaning of Elon's Tweets in this TMC post. I highly suggest reading it.
Overall, we have lots of traders who have been betting on battery day and they add volatility to the event. I would be less concerned about short-term movements and would instead concentrate on the content of battery day. Even if the significantly high production rate of the new battery production by Tesla occurs in 2022 and later, remember that many analysts are basing their TSLA valuations on years beyond 2022. Enjoy the show.
Can the mid-bollinger band provide sufficient support for TSLA on Tuesday as we head into Battery Day? Stay tuned.
Conditions:
* Dow down 510 (1.84%)
* NASDAQ down 14 (0.13%)
* TSLA 449.39, up 7.24 (1.64%)
* TSLA volume 109.5M shares
* Oil 39.50
* Percent of TSLA selling tagged to shorts: 36%
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- Jan 12, 2013
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TSLA chart above
QQQ chart above
During market trading, TSLA fought the continued downdraft of Elon's Tweets from the night before. Macros rose but speculation about Battery Day ruled the trading. Volume was a relatively light 76 millions shares, suggesting that investors were in a mind to hold, for the most part.
As the Annual Meeting kicked off and Elon expressed optimism toward the future, the stock price rose. After a break, the Battery Day discussion began and the stock price nearly erased the day's market hour losses. Alas, when word came that Tesla wasn't presently turning out cells and that a few components weren't ready for prime time yet, the stock began to sink. At the end of after-hours trading it had sunk 5.87% (see below).
The disappointing news included word that Maxwell's Dry Battery Electrode (DBE) technology still was not ready for production and that Tesla was already on its fourth iteration of a machine to create electrodes without the old solvent technique. Drew Baglino and Elon suggested Tesla might be on their 7th iteration before the problem is finally solved. Even the plaid Model S (while available for order today) is supposed to not be available until the end of 2021.
The good news was that what Tesla has roadmapped for battery, cell, and battery integration as a structural component of the vehicle will decrease the cost of batteries by 56% over the next three years. Moreover, the newer, fatter, 4680 cells will make significant range increases possible while greatly reducing the capital needed to produce a fixed GWH of batteries. The chart below gives a good summary of the expected improvements.
Notice the very substantial change to the battery cost efficiency line above if all goes as planned. Notice, too, that the line doesn't show a sudden dip at the end of three years but rather suggests that battery cost improvements will be an ongoing phenomenon in the coming three years. These economies will be realized by Tesla for cells and batteries it creates, but not necessarily for 3rd party cells.
Reactions to Battery Day will vary, with Wall Street and traders seeing nothing of great value in the next quarter or two and therefore holding a negative view of the event. Skeptics of Elon Musk will also doubt the efficiencies and timelines. On the other hand, those Tesla investors who have watched what Elon has delivered at Tesla and SpaceX will likely consider today's presentation a positive because we now see the timeline and expected cost efficiencies for Tesla's growth over the coming years. Elon said that at the end of that time a $25,000 affordable Tesla should be ready for production.
The lack of near-term benefits for shorter term traders will likely yield a dip on Wednesday as traders bail and market makers sell to unwind delta-hedging for call options that were sold but likely will expire out of the money. That delta-hedging would put some additional downward pressure on the stock come Wednesday.
Fortunately, the end of quarter is only a little more than a week away, and deliveries exceeding 140K vehicles worldwide look likely. At some point, any disappointment over battery day will transition into bidding the stock price higher prior to the Production and Delivery Report of early October. How profitable will Q3 be? TMC's @The Accountant in this post today estimate $372 million in GAAP income and $822 million in non-GAAP income, which of course would be ATH profits.
So, the most likely trajectory for the stock price would be a dip to expand upon Tuesday's after hours dip, transitioning to a climb as we get closer to the end of the month and another boost as we approach the late October Earnings Report. The market is unpredictable and timing of sentiment shifts is highly difficult to predict.
Looking at the tech chart, you can see the mid-bollinger band once again proved to be suitable support for a small downward pressure. Unfortunately, with the disappointment of no near-term benefits from Battery Day, the stock price will likely explore lower numbers before the upturn. With the 50 day moving average and the lower bollinger band close together, they may provide support if macros turn negative and the dip explores those regions.
My personal view is that I believe Tesla will be able to realize the efficiencies pointed out in Battery Day, the time scale is wide enough so that Tesla is more likely to be sandbagging rather than overly-optimistic, and in three year's time we may find ourselves in a world where Tesla's $25,000 new vehicle creates a situation where the Ice manufacturers can no longer compete. Can't wait.
Conditions:
* Dow up 140 (0.52%)
* NASDAQ up 185 (1.71%)
* TSLA 424.23, down 25.16 (5.60%)
* TSLA volume 79.6M shares
* Oil 39.60
* Percent of TSLA selling tagged to shorts: 38%
- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
After Tuesday afternoon's dip, we expected TSLA to be in the red today, and after about an hour of market trading TSLA was maneuvering around 400 (a dip of about 5.7%, which is about where you'd expect it to be, judging by the price action yesterday after hours. At the time, QQQ was trading around 270 (a dip of about 0.9%).
Unfortunately, the macros decided to have a conniption in the afternoon, with NASDAQ down 3.02% for the day and QQQ 2.2% below the 270 price of the first hour. In contrast, TSLA dropped nearly $20 from that first hour or about 5% from that first hour's trading, for a multiplier of about 2.25. In contrast, most tech stocks I follow showed about a 1.25 multiplier on their drops, so TSLA clearly felt the macro pinch harder than the rest today. It really was bad luck for the NASDAQ to take a deep afternoon plunge on the very day that TSLA was seeking to find a bottom.
When an event such as Battery Day occurs and the short-term traders head for the hills afterwards, we're looking to establish a bottom. Once a bottom is established, investors on the sidelines with dry powder jump in to start buying at the sale price and the reversal happens with great certainty. As an investor, I typically look for a bounce before I buy at the bottom of the dip, because without the bounce there's little evidence that the bottom is in yet.
While the short-term traders were fleeing, more serious investors and analysts were applauding battery day.
* Goldman raises TSLA's price target from $295 to $400
* Deutsche Bank upgraded their hold rating to buy and raised their TSLA price target to $500
* Baird raised their price target from $332 to $360
* Other analysts noted positive expectations for TSLA because of the very aggressive growth targets the company has set
In light of the improved long-term outlook for TSLA following battery day, and in light of the substantial dip currently underway, those investors with dry powder are going to be in an attractive buying position very soon
News:
* California plans to phase out ICE vehicles by 2035
* Tesla sues to block Trump Tariffs on Imports from China
Coronavirus
* Today the National Institute of Allergy and Infectious Diseases (NIAID), Dr. Fauci's department, announced that a fourth largee-scale COVID-19 vaccine trial is beginning. The vaccine is made by Janssen Pharmaceutical Company, a subsidiary of Johnson and Johnson. The most appealing aspect of the Janssen vaccine is that it is a single dose product, as opposed to some of the other vaccines currently in testing.
Looking at the tech chart, the mid-bollinger band didn't stand a chance holding back the selling after the battery day event, but check out the positions of the 50 day moving average (blue line) and the lower bollinger band (green line). Notice how the lower bb provided the necessary support to get a bounce on the early August dip. Notice how the early September dip bounced off the 50 day moving average line. These two support mechanisms are well positioned to assist TSLA in finding a bottom on Thursday.
Conditions:
* Dow down 525 (1.92%)
* NASDAQ down 331 (3.02%)
* TSLA 380.36, down 43.87 (10.34%)
* TSLA volume 91.7M shares
* Oil 39.55
* Percent of TSLA selling tagged to shorts: 40%
- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
The bluebird of macro behavior shared a gift with TSLA longs today as the NASDAQ climbed into the green and stayed there for most of the day. Such a turn in macros allowed TSLA to bottom out early and then show relative strength for the remainder of the day.
Shortly after market open, QQQ dipped about 1% but then quickly recovered into the green. In contrast, TSLA ripped into a 7.2% Mandatory Morning Dip as the post-battery day dip searched for a bottom. Fortunately, TSLA recovered almost immediately and entered the green shortly after 10am. That excursion into the green was met with an immediate whack the mole and TSLA didn't resume its climb into the green until an hour later.
By mid afternoon, QQQ peaked with a rise of 1.6% while TSLA was up about 5%, for a 3X multiplier. Not bad. TSLA remained stronger than QQQ as the day ended.
I think we've likely established a bottom for the post-battery day dip, but today's TSLA trading was not exactly a big bounce as buyers returned, if you exclude the stock's recovery from its opening dip. By Monday of next week we could see an honest climb begin as investors and traders start positioning for the Production and Deliveries Report. The good news is that much of the fear of falling was drained out of the post-battery day dip today and TSLA should trade more positively going forward. Expect TSLA to swing up and down with the NASDAQ, and a 2X multiplier would be my best guess. If TSLA makes it over 400 on Friday I wouldn't be surprised if the stock picks up frisky behavior on the up side.
With an eye towards option expiration Friday, the big quantities of expiring call options are at 450 strike or higher, so there's not a great deal of incentive by market makers to significantly affect Friday's stock price. For the 400 strike, puts outnumber calls, and so a close right at 400 might be close to optimal. Maximum pain is currently at 405.
Looking at the tech chart, you can see that the thick part of today's candle (opening price to closing price) sits right on the 50 day moving average. If you review a long-period tech chart from a previous post, you'll see that very often support such as the 50 DMA or the lower bollinger band will hold, but the stock price will make an excursion below during intraday trading. This is pretty common behavior. I'm awarding the 50 day moving average with its second save of the month. Take a bow, 50 DMA.
Looking toward Friday, if macros cooperate, we could see TSLA extend Thursday's climb. I'll be especially curious to see Friday afternoon's trading as the Friday to Monday trade may once again be worth a shot.
Conditions:
* Dow up 52 (0.20%)
* NASDAQ up 39 (0.37%)
* TSLA 387.79, (1.95%)
* TSLA volume 96.6M shares
* Oil 40.33
* Percent of TSLA selling tagged to shorts: 37%
- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
We TSLA investors are used to seeing TSLA down on Fridays, due to manipulations by the option sellers. Interestingly, this week TSLA was trading slightly below the max pain number of 405 and below the big accumulation point for puts and calls (400 strike). Consequently, as macros were strong on Friday and TSLA rose with them, we didn't see much effort being put forth by the market makers and hedge funds until TSLA exceeded 405. At that point, they went to work, trying to prevent it from rising higher.
Comparing the two charts above, you can see that TSLA started market trading much stronger than QQQ, which was dipping into the red the first hour while TSLA was soaring. We even saw the NASDAQ give great excuses in the first hour for a Mandatory Morning Dip of TSLA, but it never happened. I think what was going on instead was that Thursday's bottoming out of the post-Battery Day dip was too lukewarm to be considered a real bounce, and so investors continued Thursday's uptrend on Friday to define a real bounce.
Moreover, sentiment about Battery Day has accelerated in shifting from a negative (as defined by short-term traders) to a positive. Evidence?
* from Marketwatch: Opinion: Disappointed by Tesla’s Battery Day? The electric-car maker has been winning by playing the long game
* from Sandy Munro: Sandy is Thrilled about Tesla's Battery Day & Begins Battery Mock-up
I particularly recommend watching the Munro video because it's great at helping you visualize how the new technology will improve the cars.
Moreover, battery expert Prof. Ying Shirley Meng gave high marks to Tesla's upcoming battery design in this tweet. The experts have spoken and the verdict is that Tesla's plan is top notch.
Anyway, from about 11:30am until about 1:45pm, TSLA was on a downtrend from a high of 408 to a smidgen below 400. At the same time, the NASDAQ kept rising and no negative news came out to justify the descent. I mentioned in the main investor's thread that if the NASDAQ kept climbing, the manipulators wouldn't be able to keep holding TSLA down, which is exactly what happened. from 1:45pm until market close, TSLA climbed from about 400 to 407.xx. I bought in at about 402 for my usual Friday to Monday short-term gamble.
My expectations are that over the weekend, auto analysts and big dog traders will have a chance to see the Munro video and they'll realize just how far ahead of the rest of the auto industry TSLA is and how it continues to pull further ahead. Moreover, California's announcement of a coming end to ICE passenger vehicle sales in the state, starting in 2035, when combined by similar decisions in Europe, suggest that the transition to EVs is going to be dramatic. With Tesla laying out the plan for reaching terawatt/hr levels of annual production, the future looks very bright for Tesla. Because I believe the sentiment shift will continue over the weekend, I feel good about my Friday to Monday bet and feel great about my long-term investment in Tesla.
Notice that volume was low for a 5% increase in stock price, a mere 67 million shares traded. Consequently, as TSLA started marching higher in late afternoon, market makers were forced to start delta-hedging, which contributed to further climbing. At 4:00pm, over 2 million shares traded in a 1 minute time period, and I suspect much of the buying was by hedge funds and market makers trying to catch up with their delta-hedging. I believe the additional climbing for the first 20 minutes of after-hours trading was also primarily catching up with delta-hedging. The dip afterwards occurred when the delta-hedging was completed and the buying slackened.
Since early September, the shortvolume.com chart shows TSLA shorts have been tagged with about 37% of selling. Friday's number was 38%.
Technical Analysis for Newbies
The technical chart above gives a great opportunity to look at technical analysis. When I first became serious about active investing, I was skeptical about technical trading. It looked like voodoo to me. In time, though, my opinions changed.
* I can remember two instances when TSLA took a deep, deep, high dive, and in both instances @Curt Renz spoke up, gave the Fibonacci Retracement number (which I believe was a 38.2% dip), and magically, in both cases, the stock slide reversed at that number. How could this possibly work? One answer is that technical analysis is distilled from decades of watching investor behavior, and it is related to repeated behaviors that are related to investor psychology. The second reason for technical analysis to work is because there are so many managers of large portfolios who believe in it, technical analysis sometimes become a self-fulfilling prophesy as the stock price nears certain technical points, which leads us to the next point...
* Notice on the technical chart above that every bottom of the past 6 months was a bounce off either the mid bollinger band, the lower bollinger band, or the 50 day moving average. With Tesla's valuation so much in flux with different assumptions about the future, it's really hard to nail down a point where the stock price has gone just too low based upone Price to Earnings ratios and other standard indicators of value. Consequently, technical trading becomes even more important with Tesla than with other stocks since valuation techniques are so sketchy. I think what happens is that the big traders often back off on the buying when TSLA is trading above the upper bollinger band, or they prepare to start buying as soon as the stock price reaches the mid or lower bollinger bands, or bumps up against the 50 day moving average. I suggest caution here, however, because with every one of these bottoms there could have been a horrible macro day or a piece of bad news that was serious enough to send TSLA under the support level. Fortunately, those outside risks never materialized and the record for the past 6 months remains a powerful advertisement for technical analysis.
For the week, TSLA closed at 407.34, down 34.81 from last Friday's 442.15 when speculation about Battery Day by short-term traders elevated the stock price. Now the slow appreciation of TSLA because of the long-term implications of Battery Day begin. Looking forward to Monday. Enjoy your weekend.
Conditions:
* Dow up 359 (1.34%)
* NASDAQ up 241 (2.26%)
* TSLA 407.34, up 19.55 (5.04%)
* TSLA volume 67.2M shares
* Oil 40.04
* Percent of TSLA selling tagged to shorts: 38%
- Jan 12, 2013
- 4,901
- 54,368
I suggest posing that question on the main thread.
- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
Such a strange trading day! Both the macros and TSLA began the day with exuberant price action before market open, but QQQ marched downward until early afternoon, and then it began a steady and strong climb to close. Tesla initially showed more strength than QQQ in the morning, but from about 11:25am until about 2:25pm it descended slowly but steadily, even when QQQ was rising. TSLA's slow descent while QQQ was rising was reminiscent of Friday's trading, when the same thing happened. Eventually on both days the rising macros were too much for whatever manipulation was taking place and TSLA rose into close. For today's trading, TSLA did a short dip just 12 minutes prior to close, which suggests an additional manipulative effort.
If someone was shorting the stock, they would likely want to cover that short prior to end of trading, and the over 1 million shares traded at the 4:00pm minute could well have included a lot of covering. Nonetheless, I always look for an alternative explanation, such as a big dog investor divesting shares for some reason. If this was the case, volume would likely be a bit higher than normal, but instead we saw only about half the volume of a normal day, a mere 49 million shares traded. Excess selling wasn't the problem.
Perhaps an incentive for manipulations this early in the week is to 1) avoid another Monster Monday and 2) restrain the climb as much as possible this week leading up to Friday because it's possible that Tesla's Q3 Production and Delivery Report could be announced by Friday, which could wreak havoc on Market Makers and Hedge Funds doing lots of TSLA option sales. Looking at the max pain chart below, there's a peak at 450-strike calls and an enormous peak at 500-strike calls. Things are going to get expensive for options sellers if TSLA goes ballistic on Friday.
Perhaps news could explain why TSLA didn't give us the Monster Monday today that macros plus pre-market Tesla sentiment might have sparked.
* Adam Jonas was at it again, suggesting that Tesla sales in China might sink to zero by 2030, due to Chinese government concerns
* Elon was interviewed by Kara Swisher today, and said that Tesla may be overvalued today but he thinks it will be worth more in 5 years. My reaction is that this is just Elon trying to be the anti-Trevor Milton and avoid hyping his stock.
We also learned in the interview that Tesla has been driving vehicles with the new 4680 cells since May, which suggests the performance numbers of these cells are a known quantity and not just an optimistic estimate
* Elon Tweeted the quote below, suggesting that Tesla could be selling 20 million EVs a year in 2030, probably sooner. In contrast, Adam Jonas only figured 5-6 million a year in 2030 to reach his bull case. I'll put my money on Elon's estimate.
Finally, this recent video by @DaveT suggests that Elon might have exaggerated the timeline for certain advances mentioned at Battery Day in order to avoid osborning the current products, a sentiment I too hold..
Looking at the tech chart, TSLA has once again made its way above the mid bollinger band after a three day excursion below it. Not too scary. Notice Monday's volume in the bottom of the chart, only about half of normal.
Conditions:
* Dow up 410 (1.51%)
* NASDAQ up 204 (1.87%)
* TSLA 421.20, up 13.86 (3.40%)
* TSLA volume 49.0M shares
* Oil 40.36
* Percent of TSLA selling tagged to shorts: 39%
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QQQ chart above (note: QQQ dips were only about 0.5% and so I changed vertical scale to reflect the small changes)
As we last left off, on Friday and Monday we saw downward trajectory for TSLA from about 11am into mid afternoons, in spite of NASDAQ strength, suggesting an effort to curtail TSLA's price rise during lower volume hours. For Tuesday's trading we saw a couple robust Mandatory Morning Dips thrown at TSLA investors, but the general trend of the past three days has been for TSLA to show strength relative to macros, and so as noon approached, TSLA rallied into the green and stayed there for most of the day, despite weak negative trading of the NASDAQ. A little dip of the NASDAQ in the final half hour of trading resulted in TSLA closing in the red.
Overall, I've seen MMD and downward pressure at end of day as general themes in TSLA trading, and these are not organic trends that naturally occur in most stocks. They are typically manipulation efforts. My thought is that the hedge funds and market makers who sold options expiring last week made a bundle of money with TSLA closing near the sweet spot on Friday. They don't know what Friday holds, but if there's no Production and Deliveries report before market close on Friday they'd like to repeat the process. Because these manipulations are putting a cap on how high TSLA can climb prior to Friday, and because the FactCheck numbers are so inflated this quarter compared to others (141K deliveries), we could see an effort to contain the P&D report response if deliveries are in the low 140s. If the Q3 P&D report doesn't excite, the ER should, however. The problem with the ER is that it is too close to election day and election day may be the dominant focus of investors during late October and early November.
Low volume again today suggests few are selling, but buyers aren't materializing as you'd expect for a significantly better P&D report than we've ever seen. Let's see what happens as we get closer to week's end.
Looking at the tech chart, TSLA managed to hang in there above the mid-bollinger band today. The price 420 has been a sweet spot for the stock and with the mid bb nearby, there's further attraction to this price point. Notice that the upper and lower bollinger bands are constricting, due in part to the narrow trading range in recent days. One benefit of the lower bb rising is that if it can align with the 50 day moving average line (blue) the combo could provide some nice support, if needed.
Conditions:
* Dow down 131 (0.48%)
* NASDAQ down 32 (0.29%)
* TSLA 419.07, down 2.13 (0.51%)
* TSLA volume 49.7M shares
* Oil 39.16
* Percent of TSLA selling tagged to shorts: 36%
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TSLA chart above
QQQ chart above
Today was day three this week of an effort by option sellers to reduced TSLA's climb prior to the release of the Q3 Production and Delivery report. Because the report could possibly be released before market open on Friday, the option sellers could be caught with a rapidly rising stock price (if the report beats expectations) but lacking time to properly hedge for the climb.
Looking at the TSLA chart above, you can see pre-market trading of TSLA riding noticeably above QQQ, suggesting continued positive sentiment for TSLA, relative to the macros. Next, there's a pronounced dip just prior to market open, a favorite manipulation in recent days. Remember, that with volume unusually low this week manipulations require less capital. Check out the three walkdowns of the stock price, one at 10am, then at 12 noon, and another beginning at 2pm. Now contrast this trading to QQQ's and you'll see that TSLA has been marching to its own drummer today instead of following the NASDAQ at an exaggerated multiplier. How did the option sellers cover their manipulations of TSLA today? The nearly 2 million shares traded in the final minute of market trading would likely be the answer.
Overall, I see these manipulations as a positive sign, which suggests to me that the price you see before you is a discount made possible by extraneous efforts, and when the stock is priced at a discount, that discount tends to attract buyers and discourage sellers.
Everyone's eyes are on Q3's Production and Delivery report, of course. Thursday marks the first day of Q4 and Friday is likely the first day we could see trading influenced by a released report. Troy thinks Tesla will deliver 143,051 vehicles in Q3, and credible sources I know find these numbers credible and with stories popping up of vehicles getting delivered in Northern Calif same day as they emerge from the factory, I wouldn't be surprised if actual delivery numbers are higher. Tesla did their own survey of analyst P&D report numbers and came up with 135.9K for Q3.
Considering that this week's TSLA climb has been artificially held back, and considering that most indicators point to a beat in Production and Delivery numbers, I would expect Thursday to be a positive trading day and possibly one where the manipulators lose control of the stock price.
Troy's chart: https://twitter.com/TroyTeslike/status/1311407099717525505
Max pain is at 415 as of Wednesday evening. You can see more than 16K 450-strike calls set to expire on Friday, and the market makers don't want to see a jump above this number on Friday. Thus the manipulative pressure on the stock this week to keep it from getting too close to 450 prior to the Production and Delivery Report numbers being released. If the P&D report is disappointing, the large number of puts at 400 present a threat to market makers and I suspect they would cushion the dip. Realistically, though, if there was bad news to report, I doubt Tesla would release it before market open on Friday.
Looking at the tech chart, notice this week's unusually low volume, which makes manipulations less expensive. This week's efforts to keep TSLA a decent distance from 450 by the market makers shows up in the tiny candles we see slowly rising above the mid bollinger band.
Conditions:
* Dow up 329 (1.20%)
* NASDAQ up 82 (0.74%)
* TSLA 429.01, up 9.94 (2.37%)
* TSLA volume 48.2M shares
* Oil 40.20
* Percent of TSLA selling tagged to shorts: 37%
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TSLA chart above
QQQ chart above
I love days when you think TSLA will do well and it does. TSLA rose 3X the NASDAQ's rise today. This week, we've seen significant evidence of manipulations to keep TSLA from rising too much because the market makers and hedge funds that sold options expiring Friday are concerned they're going to lose money. Yes, many are delta-hedged, but as the stock price rises rapidly the percent an option rises vs. the stock (delta) changes, and additional hedging becomes necessary if the option seller wishes to remain neutral.
Anyway, because of the artificial negative pressure on TSLA this week (mid-day and into-close pushdowns, among other efforts), TSLA looked poised to have a strong day today, which has been regarded as the last sure day to buy in before the Q3 Production and Delivery Report comes out. To me, it felt much like a Monster Monday following a manipulated dip on Friday. I suggested the manipulators might lose control of the stock price, and they did.
Throughout the morning TSLA remained below 440 (except for momentary excursions), suggesting that the options sellers were working the stock to keep it under 440. Note the really well-defined plateau at 440 just prior to noon. A little past noon QQQ started rising, and at this time TSLA broke out and started running higher, ultimately being controlled again a little below 447. Alas, as close of day approached, even 447 fell. I suggest that the manipulators ran out of ammo in selling to control the stock price, a situation that was made possible when the NASDAQ rose and placed too much buying pressure on TSLA at the artificially low prices.
Come after-hours trading, we saw a big dip around 5:15pm. This was when the Standard and Poors Committee announced another addition to the S&P 500, and it wasn't Tesla. It really is a nonsense dip because S&P500 inclusion will come some day, but holding one's breath for it to happen right away is nuts. Speaking of nuts, the committee is likely waiting for TSLA to settle down to a more reasonable valuation following this year's rapid climb, according to a former committee member in this Bloomberg article. The committee could have moved forward with inclusion when TSLA was offering $5 billion in new shares, but it lost that chance. Now, if Q3 P&D Report numbers are a beat, we can expect the stock price to head higher, and Q4 should be significantly better than Q3. The S&P500 ETFs may find themselves in a tough spot, wrestling with other funds for inflated-price TSLA shares as the stock gains strength and the Berlin and Austin GFs come closer and closer to rolling out even more Teslas.
Trading during the final minute of market trading exceeded 1.3 million shares, suggesting lots of covering after day-shorting by you know who.
Rob Maurer of Tesla Daily has released his expected Q3 delivery numbers, and they are 142,600. In the following video, he shows how he deduced the likely production numbers in Q3 and then goes on to show how he transitioned those numbers to arrive at delivery numbers. Remember that Troy's Q3 estimated delivery numbers were 143,051.
In contrast the latest Factset estimates according to Maurer is 136,350 (a decline from before) and Tesla's estimates by contacting 22 companies is 135,906. If our retail delivery gurus are right, then we will see a beat for Q3.
In other news:
* Tesla raised the price of Powerwalls from $6500 to $7000 today, indicating strong demand.
* Tesla lowered the price for made in China Model 3s with the new chemistry batteries, and the response is brisk sales, according to one source.
* Another source says Tesla is planning to add a third shift to GF3, which will bring Shanghai to round the clock operations.
Looking at the tech chart, the stock price has climbed halfway between the mid and upper bollinger bands, a familar place for it to be. Both bollinger bands have contracted inward with the generally benign trading of the past week and a return to previous price levels. A significant beat of the Production and Delivery Report would be a strong enough catalyst to send the stock price above the upper bollinger band. OTOH, if there's a noticeable miss, we have the 50 day moving average and the lower bollinger band to cushion a dip.
Let me point out that TSLA has returned to recent highs before Battery Day, suggesting that HODL continues to be a good strategy in the long run. If, on the other hand, Battery Day had revealed cost savings and products that would positively affect Q4, then TSLA would have run noticeably higher and someone who moved to the sidelines for the event would have been left behind.
Best wishes to all with the numbers. If we don't receive the P&D report prior to Friday opening, the reason simply could be the need to get more numbers in first, but the market may get nervous with a delay.
Conditions:
* Dow up 35 (0.12%)
* NASDAQ up 159 (1.42%)
* TSLA 448.16, up 19.15 (4.46%)
* TSLA volume 49.3M shares
* Oil 38.52
* Percent of TSLA selling tagged to shorts: 38%
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TSLA chart above
QQQ chart above
Before market open on Friday, Tesla announced their production and delivery numbers as shown below:
The numbers beat analysts expectations but fell a few hundred below the 140,000 mark, which was a bit of a psychological dividing line and also fell below the estimates of the most bullish investors. The results are very positive, nonetheless, and they'll lead to record profits announced at the ER. Unfortunately, since the delivery numbers fell about halfway between Wall Street analyst numbers and the more optimistic retail investor expectations, there was a bit of ambiguity in how to translate the results. On a positive macro day, this ambiguity could have been forgiven by the market, but since it fell on the day when new job numbers fell below expectations and we learned the POTUS, his wife, and a number of others with White House connections had tested positive for COVID19, the macros were red and Tesla was punished for ambiguous results. While the Dow closed down only 0.43% for the day, the NASDAQ closed down 2.22%, and Tesla was off 7.39%. Part of the reason for the oversized dip of TSLA was that many traders placed options bets that were based upon hopes for a big beat in P&D Report numbers, and as those bets look to be losers now, market makers readjusting their delta-hedging on Friday accounted for extra downward pressure on the stock.
The good news is that Friday's numbers will likely lead to record earnings at the Q3 ER. In other words, Friday's dip could well be a buying opportunity for traders positioning for the Q3 ER. In YouTube videos, both Gali and Dave Lee conclude that record profits are now likely in Q3. The computations of TMC's own @The Accountant are reproduced below from this post for your considerations.
.................................................
GAAP earnings of $356 million and non-GAAP earnings of $806 million would be stellar. Imagine Q4 earnings based upon 180,000 vehicles delivered, and you can see how forcefully Tesla's profits are going to turn heads on Wall Street. Keep in mind that 2020 has been a disaster for most every other auto manufacturer out there.
With the strong dip of Friday and likely excellent ER results later this month, I see the incentive for picking up some trading shares or leaps and benefiting from the low price now and the expected boost from the ER. Notice that I just about never buy short-term call options to cover an event. These type of bets are usually losers. If I buy shares or long-dated conservative options, however, there's money to be made if I harvest the rise and don't get greedy. TSLA's long-term prospects are excellent but short to medium term it's easy to get bitten by the volatility if your bet expires too quickly.
Coronavirus Update
With the POTUS, his wife, and several other top Republicans and white house staffers testing positive for COVID 19, the stock market had a bad day on Friday, but two positives may result from the events:
1) The defiant attitudes that some individuals have to mask wearing may soften. The intensity with which COVID spread through the top Republicans, many of whom are mask adverse, is a good reminder of the need for masks. Let's hope the country can come together a bit on this realization.
2) Monoclonal Antibodies are at last being recognized as potentially significant players in COVID treatment plans. In the past, I suspected that the POTUS would place his emphasis on vaccines for COVID 19 treatment, primarily because of the large sums of money that have already been spent on them and also the ability for vaccines to pretty quickly generate herd immunity, which would lead to the end of COVID 19. Many companies have been developing therapeutics which in essence consist of laboratory cloning of antibodies that are known to be helpful in fighting the virus. The POTUS using Regeneron's REGN-COV2 antibody cocktail in conjunction with Remdesivir and apparently having good success with it will place more emphasis upon such treatments. Consider, for a moment, if one out of every thousand patients had an adverse effect from the therapeutic. Since all the patients already have COVID19, they are in a high risk situation already, and the additional threat of the therapeutic vs. the likely benefit is very small. OTOH, if the same risk level existed for a vaccine that millions took, the risks would in many cases outweigh the potential benefits. Thus, there needs to be a higher bar for vaccines than therapeutics. The US government has already paid Regeneron $450 million to pursue the REGN-COV2 antibody cocktail (cocktail because it contains more than one antibody). The FDA has allowed non trials patients to take this therapeutic ahead of any official OK for the product. The net effect of REGN-COV2 taken with Remdesivir early is to significantly reduce viral loads in a matter of days. If these treatments can be combined with low-cost rapid COVID test kits, then a huge number of COVID-positive people could avoid the deadly storm in the lungs which has claimed most of the lives with this disease. Getting the number of deaths under control while we await a vaccine could be a game changer.
Looking at the tech chart, you can see that despite the brutal downward push on TSLA this Friday, TSLA still managed to close above the mid-bollinger band. With any help from macros, we should see a recovery begin on Monday.
For the week, TSLA closed at 415.09, up 7.75 from last Friday's 407.34. The past week was a nice recovery as investors and traders positioned for the 3Q Production and Deliveries report and TSLA reached pre-Battery Day levels before Friday's dip. Considering the potential for Q3's ER, almost certainly the most profitable to date, the market would be nuts to not start bidding up TSLA's price prior to a likely late October ER (unless macros are in the dumpster). Hope you've had a good weekend!
Conditions:
* Dow down 134 (0.43%)
* NASDAQ down 251 (2.22%)
* TSLA 415.09, down 33.07 (7.39%)
* TSLA volume 69.6M shares
* Oil 37.01
* Percent of TSLA selling tagged to shorts: 40%
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TSLA chart above
QQQ chart above
Monday was a strong day for the macros as the POTUS showed improved health. Naturally, traders jumped in shortly after open, hoping for another Magnificent Monday. Alas, someone had another idea and after TSLA peaked at 10:07am it began a long, almost linear descent down to about 420 a bit after 2pm. Volume was unusually low at less than 45M shares traded. I suggest multiple incentives for carrying on such a walk-down: 1) It is profitable to walk a stock down in price when you are successful, and 2) Option sellers and Market Makers will profit if the stock closes near this week's Max Pain of 420. The walk-down helps to set up such a scenario. QQQ was mostly level during most of the walk-down.
Unfortunately for the walk-down manipulators, the NASDAQ caught its second wind after 2pm, and the combination of rising macros and an afternoon price that was significantly discounted resulted in buyers crying "Bullsugar" to the descending price and jumping back into TSLA, enabling the stock to rise above 425 by close.
Down then Up or Just Up?
Will TSLA take a noticeable dip before the Q3 ER comes out? Tesla bull analyst Pierre Ferragu originally thought so. When he originally gave a price target of 1500 for TSLA, he was way ahead of the pack, but after the split the resulting $300 price target looked positively conservative, and he stated that he had a "hold" rating because he thought there'd be a better entry price. Alas, 3 days ago Pierre raised his TSLA price target to $400, and so I don't think he's expecting that much of a dip after the good P&D Report numbers came out.
There's another kind of Down then Up fortune teller out there now, and they're not looking out for your best interest.
* Barron's published this story entitled "Tesla Stock Is Too Expensive, Some Analysts Say. Buy on Weakness, Says Another. The Barron's article quotes perpetually bearing analysts at Needham and J.P. Morgan. Then they take a bullish analyst's comments out of context to suggest that TSLA will dip, but in actuality the analyst merely said "use stock weakness to accumulate". Thus, Barron's is doing the bear's bidding at the moment.
* This morning in the main investor's thread, @rsm287 posted this image, which is of a mini-tender offer by a company trying to buy 500,000 shares of TSLA at $420 US. The implication is that large companies have taken the Production and Delivery numbers into account, plugged them into their spreadsheets, and deduced that Tesla is going to show a very substantial profit at the Q3 ER. They're trying to pick up lots of shares through direct purchase, but other less honest companies will likely use tactics to scare investors out of their shares (such as by manufacturing dips in the stock price).
* Consider that Friday's trading had much in common with Monday's in that we likely saw an artificial dip on steroids as the day progressed, and these dips likely were the result of shorting, covering, shorting again, covering again, but as the stock price fell the process of pushing TSLA further down was a profitable enterprise for its own sake. The difference between the two days, of course, was that Friday was a deeply red macro day and Monday a solidly green macro day. Nonetheless, the trading trajectory was negatively manipulated on both days and the manipulations were both profitable, with Friday's of course being more profitable due to the help by macros in pushing the stock lower and making the shorting just that much more profitable.
To my eyes, there are big dog investors who have plugged the P&D report numbers into their spreadsheets and now want to accumulate at the best price possible. Whether they succeed in generating a dip of consequence is likely dependent upon macros. My golden rule for dealing with the manipulators? Don't sell them your stock.
Monday's Max Pain drifted to 420 at close. Looking at the 420-strike spike, puts greatly outnumber calls at that strike, so I suspect Market Makers would prefer to see TSLA close just a smidge above 420 this week, if things don't change much. The past two weeks have been close enough to max pain to make the weeks very profitable for the option sellers.
Looking at the tech chart, the mid bollinger band has been fending off the dips quite well so far.
Conditions:
* Dow up 467 (1.68%)
* NASDAQ up 257 (2.32%)
* TSLA 425.68, up 10.59 (2.55%)
* TSLA volume 44.7M shares
* Oil 39.29
* Percent of TSLA selling tagged to shorts: 39%
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TSLA chart above
QQQ chart above
Let's look at Tuesday's trading through the lens I described yesterday:
* Big dog investors want to buy TSLA (because of excellent P&D report numbers) but want the best possible buy-in price prior to the Q3 ER
* The current ambiguity about Tesla's short-term price direction allows big hedge funds to successfully short-sell during any TSLA weakness and then cover lower in a profitable pushdown pattern
* Market makers made lots of money on TSLA the past two weeks with it closing so close to max pain, and they're looking for week 3 in a row. Yesterday and today's max pain number is $420 for Friday expiration. The market makers will be assisting the stock in hitting close to that number again this week, if macros and news permits.
Now, let's take these three forces and see how they may have affected TSLA's trading today. TSLA traded up about 0.5% a couple minutes after opening. At 11:28am TSLA hit a morning low of down 2.9%, for a movement of 3.4% downward. During this same approximate time period (actually until 11:52am), QQQ dipped about 1%. Thus, we had TSLA falling at about 3.4X QQQ's descent. If you look at TSLA's dip, it was more or less linear as hedge funds used short-selling to generate a dip on steroids and then cover at lower prices, resulting in quick profits from the manipulations.
Initially, the push down engineered by the hedge funds worked in the market makers' favor because TSLA was trading early in the morning at 427ish and the market makers would rather see the price closer to 420. No problems there, have fun hedge funds! Hedge funds being hedge funds they took the dip down as low as they could, but when the NASDAQ and QQQ turned around, that was the end of it. TSLA bottomed out about 413ish. Big dog investors saw this as an attractive buy point and started scooping up shares. Alas, once TSLA climbed too far above 420, it went into a dip that was not seen in the macros and gyrated a bit up and down, climbing and descending through 420. Market makers were happy.
Alas, that darn QQQ started climbing and placing upward pressure on the TSLA stock. This pressure maxed out at 2:47pm with QQQ up 0.4% for the day. Market makers had no desire to see such a climb and neither did the big dog investors who quit buying below 420. While QQQ was up 0.4%, TSLA was still down 0.6% at 423, a number that still made the market makers happy.
Then the POTUS threw a curve ball to the market, saying the Republicans are stopping negotiations on the stimulus because they'll never accept Pelosi's $2.2 trillion plan and instead want to concentrate on the Supreme Court hearings. QQQ wasn't happy and after an overreaction closed down 2.15% below the pre-news level. What happened to TSLA? It closed down 2.1% below the pre-news level for slightly less than a 1X muliplier on the news compared to QQQ.
So, why did TSLA descend at a 3.4X ratio to QQQ in the morning? Quite simply, it suited both the hedge funds and to a lesser extend the market makers. Why did TSLA descend at less than a 1X ratio to QQQ on the bad news of trouble with the stimulus bill? Again, the answer is that a lower ratio suited the market makers because the direction was away from 420, the hedge funds weren't prepared to trade the dip, so they were a non-factor, and the big dog investors did some buying down at these sale prices.
The Papafox Principle
In the past few decades I have made my living as a writer, and stories resonate with me. If I can identify players in a story and their motives, I can better understand where the plot is going to take us. When I say that a dip on steroids is the result of hedge funds short-selling and then covering lower to make money am I always right? Almost certainly no. Here's the thing, though. The stories and motives that I assign to Tesla's trading behavior still are useful, whether I fully understood the mechanism for the change or not. Many market veterans roll their eyes when they hear me spouting off my reasons for the day's trading behavior, but I don't care. The stories and the motives of the characters still provide me with a pretty good understanding of what comes next and allows me to make decisions better than without them. When I see results that don't make sense with my understood players and motives, I look to revise my understanding of how TSLA trades. It's an evolving process that has taken years, but I feel fairly confident with understanding what's happening when TSLA goes up or down.
Thoughts on the Stimulus
Is the stimulus bill dead until after the election? Maybe, but maybe not. On the one hand, each party has ammunition to point the finger at the other party as they go home for re-election, and there are horrible feelings between the two parties at the moment. These ill feelings work against a deal.
Remember that every member of the House of Representatives who chooses to remain is up for re-election in a few weeks. The POTUS's tactic today clearly says the House's $2.2 Trillion bill is not acceptable to him and no more time will be wasted on that particular bill. The Republicans have offered spending up to $1.6 Trillion, so the two sides really aren't terribly far apart. All incumbents in the House look bad if there's no stimulus bill, and nobody wants to look bad right before election. An agreement is still possible this week, but I wouldn't want to wager money on one outcome or the other. Either is possible.
Looking at the tech chart, you can see that TSLA is teetering right on the edge of the mid-bollinger band. Would the mid bb prevent TSLA from falling if the market tanks in the morning? Nope. We do have the blue 50 day moving average and the lower bb standing by in case things really go nuts with the macros, but I suspect things won't dip that far, and keep in mind that there are big dog investors waiting to scoop up TSLA shares at attractive prices. Futures were neutral Tuesday night as I wrote this post.
Conditions:
* Dow down 376 (1.34%)
* NASDAQ down 178 (1.57%)
* TSLA 413.98, donw 11.70 (2.75%)
* TSLA volume 47.9M shares
* Oil 39.74
* Percent of TSLA selling tagged to shorts: 41%
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TSLA chart above
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Overnight the market got over its worry about the stimulus and both TSLA and the NASDAQ opened higher. When TSLA climbed above 422, the usual suspects saw an opportunity to profitably push TSLA down, and they took it. Around 10:30am with TSLA bottoming out around 414 and QQQ bottoming from its dip as well, QQQ and TSLA began their climb back up. Notice that TSLA's dip was a far greater percentage dip than QQQ's, however.
The NASDAQ was a powerhouse today, however, and steadily climbed until about 2pm, where it more or less plateaued until market close. Meanwhile, the market maker influence seemed to plauteau TSLA for an hour between about 11:15am and 12:15pm around 420 before the stock broke sharply upward.
From 2pm until 4pm QQQ mostly plateaued, but during this same time the usual suspects appeared to walk TSLA down from 430ish to a close at 425. These walk downs that appear unrelated to negative news or negative macros are becoming a regular event with this stock.
Good news that came out during the day for Tesla included:
* Model Y produced at Giga Berlin will use 4680 battery and structural battery pack
* A leaked email published by electrek shows that Tesla plans to increase production 20% in Q4 in an attempt to produce and deliver 500K vehicles during the quarter
What really caught my attention was an after hours rise of the stock price after 4:20pm. It looks like this rise was in response to an upgrade of TSLA by bullish analyst Pierre Ferragu. Pierre had been conservative after TSLA's mega-runup this year and first had a $300 price target that he raised to $400 about 4 days ago. Alas, Pierre and his team took a hard look at Tesla and realized the company was ready for a relentless run over the coming decade, with no real competition in sight. Thus, Ferragu upgraded TSLA from the equivalent of hold to buy today, and gave a new price target of $578. He also in this Barron's report said that TSLA could trade at $1200 by 2025.
Such a bullish outlook by the bullish analyst who had previously been waiting for a dip could be precisely the medicine needed to move TSLA out of this low volume manipulation-fest into a climb again. Surely the Q3 ER warrants an upward adjustment to the stock price. Don't be surprised to see volume pick up as retail bulls start buying. The big dog hedge funds will try to engineer hours long push downs, but they may be broken early. The market makers may try to coax the stock back toward 420 whenever possible, but if macros cooperated, these efforts too may fall short. Big dog investors waiting for a dip may surmise that it's not coming and start picking up TSLA at higher prices. It's going to be fun to watch.
Looking at the tech chart, the mid-bollinger band worked its magic yet again yesterday and supported TSLA until it could climb today. Due to the narrow trading range of the past two weeks, the bollinger bands have squeezed closer together. An upper bb at only 465 may become a bit problematic should TSLA show record earnings during the Q3 ER. Thus, some rising of the TSLA stock price in the near future would help boost the upper bb to a higher number.
Conditions:
* Dow up 531 (1.91%)
* NASDAQ up 210 (1.88%)
* TSLA 425.30, up 11.32 (2.73%)
* TSLA volume 41.9M shares
* Oil 40.07
* Percent of TSLA selling tagged to shorts: 37%
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- Jan 12, 2013
- 4,901
- 54,368
TSLA chart above
QQQ chart above
The question going into Thursday's trading was whether the good news from Pierre Ferragu's TSLA upgrade to buy and 578 plus the other two positive stories (4680 cells to be used at Berlin and Tesla planning a 20% quarter over quarter increase in production and deliveries in Q4) would jolt TSLA out of the low-volume, perpetual manipulation patterns we've been seeing. Retail investors were encouraged and pre-market trading brought TSLA above 438. Alas, a run higher in pre-market trading is a nice setup for a lucrative push-down by the hedge funds, and the all too familiar near-linear push down began immediately after opening. Looks like the pattern continues.
NASDAQ and QQQ trading today was quite benign, despite the ragged look to the QQQ chart, which is simply an artifact of taking very small price changes and expanding them into sharp mountains and deep canyons, when in reality QQQ opened up about 0.9% and was above 0.2% up at its lowest point during the day. That's pretty docile volatility. Nonetheless, those little ups and downs of the NASDAQ led to some pretty big gyrations with TSLA as it jumped above and below the linear descent toward near-zero gain at end of market trading. Hedge funds got what they wanted (making money on the push lower throughout the day, assuming short-selling to push lower and covering at lower price points). Market makers got what they wanted (stock movement toward a close near 420 on Friday), and big dog investors drooled at the thought of TSLA coming closer to their preferred buying prices before Q3 ER.
After hours on Thursday, however, things changed that could make the manipulations more difficult on Friday, and could even upset the manipulation applecart. Tesla has announced that the Q3 Earnings Report will be held in the afternoon of Wed., Oct 21. Counting Friday, that will be just 9 days of trading prior to the ER. Big dog investors hoping to pick up shares on the cheap may be realizing that it won't happen, and so at some point as TSLA heads higher in anticipation of the approaching ER, volume should increase as buyers get more aggressive.
Why such low volumes these past two weeks? I think the reason is that TSLA shareholders are becoming a battle-tested group and they're unwilling to part with their shares with a record Production and Delivery Report behind us and a record ER coming Oct. 21. This is not an environment where opportunists are likely to pick up shares at bargain-basement prices. HODL, my friends.
The Ferragu upgrade from hold to buy suggests that Pierre no longer is holding his breath for a dip prior to the Q3 ER. To this news, add the relatively quick time frame of the ER (October 21) and you now have double the reason to believe that substantially better TSLA prices will not be available prior to Q3 ER. With every passing day, the reality of these two implications becomes all the stronger. Tick, tick, tick.
Normally, Fridays are the most heavily manipulated days of all as market makers and hedge funds seek to maximize profits, but with futures up Thursday night and with the new knowledge that only nine trading days exist before the ER, it's possible that TSLA could rally instead. OTOH, if manipulations pull TSLA close to 420 for Friday's close, I'll likely be buying trading shares about 2pm for Monday's open and possibly to hold through the ER.
Looking at the tech chart, you can see the bollinger bands squeezing in even further as the narrow trading of the past two weeks continues. Notice how many black candles (green, but closing lower than opening price) we see and how short the thick portion of the white candles are. Both the short thick white candles and the black candles are telling us the same story: most of the stock price increases in recent days take place as the price gaps up on open and then either loses some of those gains or barely gains during market trading hours. The reason? Lots of manipulation are taking place during market hours that are wiping out most of the opening gap-up gains.
Conditions:
* Dow up 122 (0.43%)
* NASDAQ up 56 (0.50%)
* TSLA 425.92, up 0.62 (0.15%)
* TSLA volume 40.4M shares
* Oil 41.04
* Percent of TSLA selling tagged to shorts: 38%
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