Papafox's Daily TSLA Trading Charts

[Papafox]

Note: post was delayed because TMC was unavailable during posting time early Friday morning

TSLA chart above

TSLA chart above

Thursday was going to be the day we saw just how much capping must have been done to hold TSLA in Wednesday’s after hours trading at a price lower than Tuesday’s closing price, even though the earnings report was nothing short of epic. What we found was that instead of TSLA closing near 1020 during the hours following Wednesday’s Earning Report and Conference Call, TSLA zoomed up to the 1080s within 15 minutes of market open on Thursday. Volume was too high on Thursday open for the market makers and hedge funds to work their shorting and capping mischief, and so we got a more honest view of how the market regarded Tesla’s Q1 earnings.

Unfortunately, the market had a conniption over an increase in 10 yr. treasury bond yields and the whole market headed down throughout the day. The NASDAQ lost 2.07%, NVDA closed down 6.05%, and ARKK lost 4.97%. TSLA’s gain of 3.23% made it the only stock in the green in many of our feeds at close on Thursday, but keep in mind that 3.23% gain followed about an 8% dip of TSLA from the day’s morning high.

May I just point out that a trading day like Thursday's with a long downward run lasting most of the day is a perfect opportunity for rolling some in the money call options forward at no or little cost if you are trading in a tax-free environment such as an IRA. Of course I instead spent the day driving my dog to two vet appointments, sigh.

If you take a look at the treasury yield chart below, you will realize that although yields spiked in the morning, they drifted lower before close and Thursday’s close of 2.9% was actually lower than Tuesday’s close of 2.94%. We have a case of the market again afraid of its own shadow. A 2% drop in the NASDAQ on Thursday is really silly when we’ve seen similar yields already this week. Eventually the overreactions will give way again to tech stock FOMO.

This chart gives a great idea of just how well TSLA has been outperforming analyst expectations lately. Wednesday's beat was massive.

Overall, TSLA clearly has more need to move further up before the magnitude of this excellent quarter is reflected in the stock price. I strongly suspect that the market makers have been adding downward pressure to market forces on Thursday. After all, they have option closures on Friday in need of rigging. Be patient.

News:
* Elon has apparently lined up the funding he needs to make a tender offer for Twitter
* Trip Chowdhry raised his TSLA price target to $2300

Compare Thursday's 10 yr treasury yields to Tuesday's. Tuesday was a big up day for the market and yet Thursday's somewhat more benign yield performance caused a 2% dip in the market. Not rational nor consistent.

Max pain showed 985 on Thursday morning. I guess the reason was to deny the 1000 calls from moving into the money.

TSLA busted through the mid-bollinger band with a vengeance on Thursday but the unrealistically negative market allowed for TSLA to be pulled back down on the side the market makers want. Looks like we'll have to wait until next week to top the mid-bb (macros permitting).

Conditions:
* Dow down 368 (1.05%)
* NASDAQ down 278 (2.07%)
* SPY down 7 (1.50%)
* TSLA 1008.78, up 31.58 (3.23%)
* TSLA volume 34.4M shares
* Oil 103.8
* IV 54.3, 44%
* Max Pain 985
* Percent of TSLA selling tagged to shorts: 39% (shortvolumes.com)

 

[Papafox]

With the ability to finally catch up on TMC posts from Thursday, I see that much of the day's weakness could be attributed to Jerome Powell's remarks regarding May's interest rate hike. I better understand now why the NASDAQ tanked on Thursday. It wasn't so irrational.

 

[Papafox]

TSLA chart above

QQQ chart above

Friday was another massively negative day for the NASDAQ, which lost 2.55%. The market is still fretting about the Fed comments of half a percent increase possible in May, and apparently the market is somewhat skittish as another week of earnings report loom on the horizon. In contrast with the NASDAQ's performance, TSLA with slightly low volume of 23.2M shares lost a mere 0.37% and traded well into the green for much of the day.

A better lens would be to look at TSLA this week vs. the NASDAQ and a typical tech stock (I'm choosing NVDA because it is a high performer like TSLA). The NASDAQ lost 3.7% for the week and NVDA lost 8.2%. TSLA gained 2%. Considering the quality of Tesla's earnings report on Wednesday, a 2% gain for the week sounds way too low. OTOH, another top tech stock, NVDA lost 8.2% and the difference between NVDA and TSLA for the week was over 10%. Given that perspective, TSLA's small gain for the week doesn't look quite so bad.

Further, the effects of TSLA Q1 ER will be a positive force throughout the quarter, and so the positives of the ER have not been fully realized. The fear of inflation (higher interest rates) plus fears generated by the Ukraine war are more transitory (I hope). I've lived through periods of elevated inflation in the U.S. and they were different than this one. So much of what's happening at present is a result of the pandemic. People saved money during their time at home, supply chains became disrupted, and a war sent oil over $100/barrel. Expectations of many are that the inflation will drop soon enough. In contrast, some of the inflation we saw during the 70s was viewed as longer-lasting, which led to pressure on wages and a cycle that put pressure on the inflation to continue. Should Russia truly be defeated in its attempt to secure the East and South of Ukraine as regions aligned with Russia, a removal of its army could allow some Russian sanctions to be dropped, which may well allow Russian oil to flow more readily (which would of course drop world oil prices). Keep in mind that not only do high oil prices affect inflation indexes such as the CPI directly, higher priced oil affects these numbers indirectly because the cost of energy is involved in almost ever item sold.

The really great news about the Russian oil situation is that it has caused Europe to move toward clean energy (and a lack of dependence of foreign oil) as quickly as possible. This move means that EVs, batteries and solar will be in high demand going forward. For Tesla's products, it's becoming an even stronger $eller's market.

The coming week could be a crap shoot of days of worry interspersed with days of FOMO regarding growth tech stocks. Please don't get whiplash watching the market this week. Since Wednesday's Earnings Report, we haven't yet seen a day with the NASDAQ losing less than 2%. I'm looking forward to seeing TSLA's trading on a green day for the macros.

News:
* CNBC says Twitter is back in talks with Elon regarding his acquisition offer
* Archived emails between Elon and the Saudis have been released, which sheds light upon Elon's "funding secured" belief.
* ARK Invest reportedly sold $100 million in TSLA this past week. My take is that Cathie Wood likes to sell her strongest stocks during a turbulent week and use the funds to buy more of her most beaten-up stocks (that theoretically have more room for bouncing back). Please don't read more into the move than this.
* This Tweet by Elon shows how he found out about Bill Gates being apparently short TSLA for about half a billion dollars. That piece of information is material for investors since if Gates covers his alleged short position there will be $500 million in additional buying pressure on TSLA. Maybe I should say "when". It's a really bad look for Gates to be crusading against climate change while simultaneously shorting TSLA. Tick, tick, tick.

Friday provided a day of relief from climbing 10 year treasury bond yields.

Max pain for this coming Friday is 1010. Looking at the chart above, you can see mixed calls vs. puts domination between strikes 1000 and 1050. The first really substantial call wall is at 1100, which would allow TSLA to run higher uphill without the market makers playing hardball early in the week.

Check out the heavy vertical lines, representing the final trading day of each week. Notice how close TSLA closed to either max pain or the alternate max pain when max -pain was unachievable (red dots). Max pain and closing price lines came very close to each other on most of these end of the week days, suggesting that market makers are doing well in this fearful environment. (chart by @JimS )

Looking at the tech chart, the @&$#@! market makers (with help from macros) managed to keep TSLA bellow the mid bollinger band all days of the past two weeks of trading with the exception of Thursday morning. My hope for the coming week is a strong break higher and above the mid-bb at some point and the stock remaining on the "good" side of the mid-bb.

For the week, TSLA closed at 1005.05, up 20.05 from the previous week's 985.00 close. Considering how little the stock price has risen since the march of positive quarterly ERs began, it's fair to say the spring is getting mighty compressed, Hoping you all enjoyed your weekends!

Conditions:
* Dow down 981 (2.82%)
* NASDAQ down 335 (2.55%)
* SPY down 12 (2.74%)
* TSLA 1005.05, down 3.73 (0.37%)
* TSLA volume 23.2M shares
* Oil 102.1
* IV 56.9, 52%
* Max Pain 1000
* Percent of TSLA selling tagged to shorts: 41%

 

[Papafox]

TSLA chart above

QQQ chart above

Regarding the markets, it was yet another day when Mr. Market couldn't decide whether to panic or buy and he ended up doing some of both. Regarding TSLA, Twitter agreed to be acquired by Elon today, which is the lens through which one should look at Monday's trading.

A few minutes before 3:00pm, news went out that Elon's bid for Twitter had been accepted. You can see a very steep dive of both QQQ and TSLA approaching 3:00pm and lasting about 10 minutes. The way my NASDAQ charts looked to me, TSLA led QQQ's initiation of the descent and its recovery by about one minute. If that is so, then the NASDAQ dip may well have been precipitated by TSLA's dip.

What's fascinating with TSLA is what happened next. Both QQQ and TSLA started recovering, QQQ immediately and TSLA after a few minutes of small downward jabs and recoveries. QQQ continued up into close while TSLA plateaued at 990 and traded horizontally in a series of small downward jabs and recoveries until 10 minutes before close and then it made a climb of about $8 in the remaining 10 minutes of market trading. This trading behavior leads us to one of two conclusions:
* TSLA was just responding to market forces as some investors overreacted to the news that Elon was buying Twitter for tens of billions of dollars. The fear of course would be that he'd have to sell some TSLA shares to pull off the transaction.
* The other possible explanation is that various forces may be intentionally exploiting news of the Twitter acquisition to place downward pressure on TSLA. It could be market makers trying to keep TSLA a bit below this week's max pain price of $1005 so as to better constrain TSLA climbing after last week's excellent Q1 ER, or it could even be a big short trying to generate fear of the Twitter acquisition in TSLA investors so as to perhaps generate a larger dip this week. In any event, the market decided that a $20 drop on this Twitter news was too much and buyers moved in to take advantage of the discount. The long plateau from about 3:22pm until about 3:50pm looks suspiciously like capping to my eyes. The cap failed with about 10 minutes of trading to go and the stock recovered an additional $8. Of course if some big entity wants TSLA to drop there's often a willing media outlet to oblige in assisting. This Fortune Magazine article carried the title "Tesla shares plummet after Elon Musk's successful bid for Twitter".

We'll see as the week develops if nefarious forces will succeed in generating a little fear here.

Overall, I believe Elon's acquisition of Twitter will be a net positive for Elon's reputation and Tesla's indirectly as well once the necessary changes are made to the Twitter software. Opposition will lighten as people understand the situation better. Jack Dorsey said it best on Monday in this Tweet that "Elon is the singular solution I trust." In later Tweets, Jack went on to explain how an ad revenue model and decisions of the board have harmed Twitter.

Thanks to @mickificki for posting this Tweet on TMC today to explain why Elon shouldn't have to sell TSLA shares to buy Twitter and take it private:

10 yr. treasury bond yields closed at a benign 2.82% on Monday

Max pain on Monday morning was listed as 1005. You can see that the 1000 strike is heavily dominated by puts, and so market makers would likely want to see TSLA close above that amount on Friday (at this early stage in the week). The strike 1050 is the first real call wall of concern although there's a call hill at 1020.

Looking at the tech chart, TSLA is currently trading about $20 above Wednesday's closing price, just before the Q1 earnings report was released.

Conditions:
* Dow up 238 (0.70%)
* NASDAQ up 166 (1.29%)
* SPY up 2 (0.58%)
* TSLA 998.02, down 7.03 (0.70%)
* TSLA volume 22.6M shares
* Oil 98.54
* IV 56.0, 52%
* Max Pain 1005
* Percent of TSLA selling tagged to shorts: 38%

 

[Papafox]

TSLA chart above

QQQ chart above

I have a few ideas why Tuesday was such an UGLY day for TSLA. TSLA lost 12.18% on a day when the NASDAQ was down 2.90%. That's over a 4X multiplier, which is just way too high for a 2X multiplier stock. Once TSLA started rolling downhill the day after Twitter agreed to be acquired by Elon, investor imaginations started running away with them and we ended up with over 45 million shares sold.

Although on Monday the 3pm dip appeared to be led by TSLA's dip and the macros followed a minute later, Tuesday's dip was definitely led by the NASDAQ. In pre-market trading TSLA was in the green much of the time while QQQ remained in the red. At open, TSLA was down 0.26% while QQQ was down 0.63%. There just wasn't TSLA dread going into market open. At 9:35am, 5 minutes after open, TSLA was down 0.9% while QQQ was descending faster in a dip of 1.2%. TSLA was reacting to the macro dip.

If someone (such as Elon) was selling hard right after market open you would see that selling in the volume indicates (orange color) on the TSLA chart. What you see is light selling at open which gradually increased in volume until it maxed out during the steep portion of the morning descent after TSLA had already lost more than $50. I would find it odd for Elon to jump in and sell shares once such a profound dip was underway unless he had no choice because of timing for documentation.

Alas, TSLA tends to descend at least at a 2X multiplier to the NASDAQ in a no news situation and algos would have been reinforcing TSLA to accelerate its dip to such a multiplier. A huge dip like this often attracts hedge funds who day-short the dip and profit from it once they cover. Tuesday was a particularly vulnerable day for TSLA because of the Twitter acquisition and a lack of knowledge of how exactly Elon would pay for the acquisition. As TSLA's descent accelerated along with its volume it was easy for skittish investors to think "Elon must be selling for TSLA to be tanking like this with such heavy volumes." Those fears led to more selling while further increased TSLA's multiplier in the descent compared to the NASDAQ (and QQQ). Passing a 10% dip (roughly $100) the alternate uptick rule came into play and TSLA's descent shallowed. Notice too that TSLA shallowed around 900, which contains a huge put wall of nearly 12000 contracts. I suspect the market makers were selling to delta-hedge up to about 900 but I'm suspicious that their tactics changed near 900 because I don't think they want TSLA to go too far below 900.

Take a look at the accelerated dip you see in QQQ beginning about 3pm and notice that a similarly strong dip did not take place with TSLA. Was this "cushioning" by the market makers to help protect those 12,000 900-strike put contracts from going too far into the money? Perhaps.

Just consider the bad actors who can come out of the underbrush on a day such as Tuesday. Big shorts will do what they can to lengthen the dip, if possible, and opponents to Elon's acquisition of Twitter could potentially do some shorting just to make life more difficult for him and Tesla owners while the details are worked out.

In any event, TSLA investors are all too aware of how deeply this stock can dive when it gets started, and that fear was yet another catalyst for the selling on Tuesday.

What we need is some clarification that Elon's selling of shares for the Twitter acquisition is not an ongoing threat to the share price. A day with TSLA rising could indirectly transmit that likelihood. Otherwise we might just have to wait a few more days for the details of the Twitter acquisition to be made public. I've ridden in this rodeo many times before and I know what do to: hang on!

What happens on Wednesday could have lots to do with macros. You have the powers that want to see this dip continue ready to pour some gasoline on the fire, and you have investors with some dry powder ready to buy once they see a bottom. Macros could tip the scale to either side. Hoping too for clarification on Elon's plans so that the fears of TSLA stock selling can be removed from the equation.

Yet another day of declining 10 yr. treasury bond yields is a positive for investors.

Max pain was listed as 1000 on Tuesday morning. Puts and calls are nearly even at that strike price. More importantly there's that huge put wall at 900 that the market makers would love to close above. Market makers tend to do more of their work close to day's end, so let's see what happens on Wednesday.

Looking at the tech chart, we've descended below not only the lower bollinger band but also the 50 day and 200 day moving averages. Let's hope to see some recovery on Wednesday.

Conditions:
* Dow down 809 (2.38%)
* NASDAQ down 514 (3.95%)
* SPY down 12 (2.90%)
* TSLA 876.42, down 121.60 (12.18%)
* TSLA volume 45.38M shares
* Oil 101.9
* IV 67.5, 93%
* Max Pain 1000
* Percent of TSLA selling tagged to shorts: 45%

 

[Papafox]

TSLA chart above

QQQ chart above

Wednesday's trading of TSLA may be an important part of the antidote for Tuesday's plunge. Let me explain. On Tuesday, the NASDAQ lost nearly 3% and TSLA lost 4X that amount on fears that the extremely high volume and quickly dropping price were signs of Elon selling. Since TSLA lagged the dip in QQQ Tuesday morning, I continue to favor the idea that it was fear of Elon selling, not actual Elon selling, that set the stock up for a big drop.

Wednesday's trading was quite a different matter. Volume was average and TSLA traded higher than QQQ (TSLA was up 4.5% during its high shortly after market open while QQQ was up only 1.8% at that time). The alternate uptick rule was in effect for short-sellers so they couldn't aggressive short the stock lower. TMC member @viridi mentioned the flagrant manipulations here and here, calling the capping/spoofing "at another level today." We also saw lots of out of the money put buying, especially at 850-strike. While it's possible that is legitimate put buying used as a hedge, it's also possible that a large portion of those puts were acquired to force the market makers to sell TSLA shares so as to delta-hedge those sold puts. Thus, even with the shorting hampered by SEC rules, alternative means allowed the various forces to reduce its climb on Wednesday.

What's apparent, though, is that Elon likely was not selling shares on Wednesday with only average volume and TSLA more or less following the climbs and descents of the NASDAQ. I think what we're seeing this week is some good ole fashioned bear raid action, taking advantage of any fears from Elon's coming Twitter acquisition.

Back to the idea of the antidote, though. Even with some negative influence on its stock price Wednesday, TSLA still managed to close in the green. The modest volume and lack of trading in the red strongly suggests that Elon wasn't selling shares on Wednesday. "The sky is falling" dread of Tuesday has given way to ho-hum trading on Wednesday.

A number of companies including Facebook's Matrix did well with their earnings after hours on Wednesday and futures are very high for the NASDAQ on Wednesday night. TSLA could regain some lost value on Thursday if it rises with the macros and volume becomes great enough so as to override any of the usual dirty tricks we should expect from those who helped sink the stock on Tuesday. A sentiment that "Elon isn't selling" could possibly allow one of those big, steamroller days on Thursday. Fingers crossed. The way to spoil such a recovery would be for a truly exceptional piece of FUD to hold TSLA back in morning trading. Looking forward seeing what transpires!

News:
* On Wednesday, Elon lost his case with the SEC to dispense with his Twitter nanny (talk about irony), but in a more important development for shareholders, he won his lawsuit from investors regarding the Solar City purchase.
* Gary Black Tweeted that since the Q1 ER, analysts have raised their estimates of Tesla 2022 earnings by 9%.
* Fox Business says that the FCC threw out a request to stop Elon from acquiring Twitter

10 yr. treasury bond yields crept above 2.8% on Wednesday but it was a small enough move to not rattle the market

Max pain on Wednesday morning was 960, which is well above Wednesday's close of 881.51. We saw the put wall at 900 shrink as put holders took their profits. The most interesting development was the significant growth of 850 puts, which may be an effort by hedge funds and others with short positions to put downward pressure on TSLA this Wednesday as market makers sell TSLA shares to delta-hedge the sale of these puts. In other words, buying those 850 strike puts has a somewhat similar effect on the stock as shorting it.

One of TMC Investing thread's most helpful members suggested I post the volume chart (above) each day for TSLA. The idea is to archive the daily option trading so as to shed light on various issues that affect the stock price. We'll give the chart a try here and see how useful it proves. My warning is that this chart doesn't show current numbers of open options for each strike, nor does it show the number of options added or subtracted from that total. For example, the volume chart above shows nearly 40K 900-strike put contracts traded on Tuesday (remember this is the Wednesday morning chart) but when you look at the total number of put contracts currently active in the chart above it, you see only about 8K as of Tuesday close. Obviously some option contracts trade hands multiple times within a day.

Conditions:
* Dow up 62 (0.19%)
* NASDAQ down 2 (0.01%)
* SPY up 1 (0.28%)
* TSLA 881.51, up 5.09 (0.58%)
* TSLA volume 25.3M shares
* Oil 102.0
* IV 64.9, 82%
* Max Pain 960
* Percent of TSLA selling tagged to shorts: 45%

 

[Papafox]

TSLA chart above

QQQ chart above

First the bad news: Elon has been selling millions of his TSLA shares
Now the good news: Elon is done selling

We now know why TSLA plunged so deeply throughout Tuesday and on Thursday morning: Elon was selling millions of shares in apparent preparation to use those funds in the Twitter acquisition. Dave Lee in this video does a nice job of laying out the buying, but in a nutshell Elon sold 3.7 million shares of TSLA on Tuesday, 0.7 million on Wednesday, for a total of 4.4 million shares. Moreover, more shares were almost certainly sold Thursday morning but we'll have to wait for the Form 4s on Friday before we'll know the amount). Most importantly, he announced that he now plans no more selling.

The likely reason for selling so many shares on Tuesday was that the Form 4s for those sales would need to be released no later than Thursday evening, and so he wanted to have the selling completed by end of trading on Thursday so that he could let the market know that no further selling was planned. Without that Tweet, the selloff would likely continue. With that Tweet, one likely market response would be for investors on the sidelines to jump back in, assuming that the bottom has been reached.

I continue to believe that some of the usual suspects, upon seeing such a steep decline of TSLA on Tuesday and then again on Thursday, would have made some money by shorting that descent and thus made it worse. When we know the number of shares that Elon sold Thursday morning we can better gauge just how much of that super-steep dip of TSLA's was due to Elon's selling and how much was the result of other forces.

Since Friday is options expiration date, and since a sentiment of "the bottom has been reached" is possible with the market (depending on what's happening with the macros, etc.) don't be surprised if market makers work to coax the stock price to a more profitable level. I see 7K put contracts still open at 900, so I would expect the MMs to try for at least that price upon close. Once the stock price starts rising, you would see lower puts start to be closed, which would lead to some market maker delta-hedge buying. The negative forces that had been pushing the stock lower this week reverse and start helping the price to climb. There are lots of moving parts to TSLA trading, and keep in mind that various forces managed to minimize TSLA's climb following the epic Q1 earnings report. I wish it was all as simple as the up elevator and the down elevator, choose a button.

News:
* Tesla has passed GM and Ford in profits

10 yr. treasury bond yields have been climbing the past two days and are a bit above 2.8%. When they cross 3% expect the market to overreact, as usual.

Time for some perspective. In the Tweet above you can see how quickly Tesla revenue is growing compared to the other largest companies in the U.S. It's not even close. Want to hold shares in the most valuable company on earth? HODL TSLA with patience.

Max pain computed from Wednesday's trading was 950. Market makers would like to see TSLA move above the put wall at 900 before market close. The 950 strike shows more calls, so there's not much incentive for the MMs to see TSLA above that number at close.

800 puts and 900 calls were the hotly-traded options on Wednesday

The lower bollinger band has obediently slid itself under the Thursday closing price. Check out the 40 million share volume indicator for Thursday. Fortunately, Elon finished selling in the morning, which, along with the macro recovery, allowed TSLA to recover most of its daily loss before close.

Conditions:
* Dow up 614 (1.85%)
* NASDAQ up 383 (3.06%)
* SPY up 11 (2.53%)
* TSLA 877.51, down 4.00 (0.45%)
* TSLA volume 40.8M shares
* Oil 105.2
* IV 66.2, 87%
* Max Pain 950
* Percent of TSLA selling tagged to shorts: 45%

 

[Papafox]

TSLA chart above

QQQ chart above

Despite Elon's Tweet that he planned to sell no more shares, TSLA failed to close in the green on Friday. Although TSLA exceeded 930 in Friday morning trading, the NASDAQ's plunge of over 4% pulled TSLA slightly into the red as market close approached.

We now have clarity on just how much selling was done on Tuesday through Thursday of last week. As Dave Lee pointed out in this video, shares sold on Tues were 3.7M, on Wednesday 0.7M, and on Thurs 5.5M shares. That's a sugar-ton of Elon selling on Thursday morning and it explains the morning's strongly negative trading.

I remained cautious in my expectations during Thursday evening's post, commenting "there are a lot of moving parts to TSLA trading". Let's take a look at some of the biggest of those moving parts:
* Fears of more Elon selling due to taxes- This fear should die quickly since Elon could avoid taxes by selling shares with the same or lower basis.
* Fears that Elon's margin loan will be threatened by continued dipping of the stock price- Again, this is a fear that should disappear soon too. Elon can repay some debt that might tie up too much margin. Loans are not taken out until they're needed to buy Twitter, and that is not going to happen for at least three months. TSLA has plenty of time to recover from the present dip.
* Interest rates are heading up. Tech stocks have been absolutely pummeled under fears of rising rates. The good news? Growth tech stocks have been so inappropriately discounted already that the inevitable bounce back will come with a vengeance once the market regains confidence.
* Russian is at war and saying threatening things about nukes. The reason Putin is making threats is because the Russian army is still having a hard time making progress in Ukraine, even with the new strategy of concentrating just on the East and South. The threats are an inevitable consequence of Ukraine doing well in its fight.
* China is seeing massive Covid lockdowns, some of which have affected Tesla's Shanghai production. The good news is that Tesla has been able to reopen Shanghai and volume of production is spinning up quickly. The signal that is frightening some is Troy Teslike's April 28 estimate of 272K total vehicles produced by Tesla in Q2, vs. analyst consensus of 316K. My thoughts are that Troy typically aims low in the beginning of the quarter then starts raising his estimate as we get closer to quarter's end. Many investors are not familiar with this trait. Also, Elon said Tesla might be able to match Q1's production, which was about 305K. Analysts will need to set more reasonable numbers as we get closer to quarter's end. Tesla might actually do close to Q1's numbers, which Wall Street would see with relief, given the Covid situation in China.

The good news is that all of the negative influences above will disappear soon enough. Tesla continues to execute well and second half of 2022 should be strong enough to bring the price recovery we need. In the meantime, Tesla is is a position to start recovering some of this past week's lost share price once the NASDAQ macros improve.

10 yr. treasury bond yields exceeded 2.9% on Friday, which is a negative factor on the market. It's quite likely that yields will exceed 3% sometime in the coming week, which of course would cause the market to throw a tantrum that day.

Max pain for the coming Friday (May 6) is 925. Market makers would really like to get the stock price above 900. A big call wall is present at 950, and so they would work to hold TSLA below 950, if possible.

Look at that exceptionally high volume for 800 puts and 950 calls

The weekly chart comparing stock price with max pain continues to show substantial correlations between stock price and either max pain or the max pain substitute target (red dot) if max pain is simply unachievable. I included a red dot for this past Friday since the MMs definitely wanted to keep TSLA above 900 for the close. Unfortunately for them, the macros were just too negative in the final 2 1/2 hours of market trading for that effort to succeed. Chart by @JimS .

This is what a tech chart looks like in a week with a combination of strong macro negativity coupled with negative Tesla news (Elon selling shares).

For the week, TSLA closed at 870.76, down 134.74 from the previous Friday's 1005.05. Hoping your weekend was a good one.

Conditions:
* Dow down 939 (2.77%)
* NASDAQ down 537 (4.17%)
* SPY down 16 (3.70%)
* TSLA 870.76, down 6.75 (0.77%)
* TSLA volume 29.4M shares
* Oil 104.7
* IV 69.9, 95%
* Max Pain 925
* Percent of TSLA selling tagged to shorts: 44%

 

[Papafox]

TSLA chart above

QQQ chart above

Was Monday's macro trading about panic selling or about FOMO? Once again, it was about both and you would be well advised to take a Dramamine if watching the market progression. The up and down market in the morning gave way to a down NASDAQ in the afternoon. Then, as TMC's @Discoducky said, NASDAQ hit a 52 week low on Monday and then bounced off a critical support level. Although the Dow gained a mere 0.26% for the day, the NASDAQ rose 1.63% and TSLA levitated 3.7%. Obviously, the big afternoon action was in tech stocks and TSLA rose more than it's typical 2.1X multiplier to the NASDAQ.

The day saw lots of shorting, enough for 59% of all selling to be tagged as short. When you think about it, with the NASDAQ at a 52 week low and the market suddenly turning higher, adding to one's TSLA short position didn't make sense as an investment decision today. Rather, Monday's high level of shorting was short term efforts for quick profits or for manipulations.

Monday afternoon's big rally in the final hour left the market makers scrambling to catch up with their Delta-hedging. Fortunately for them, that huge put wall at 900 has at least for now been rendered out of the money. We saw 665K shares trade at 4pm, suggesting some covering from day-shorting plus some delta-hedge buying by the market makers. The stock's continued rise in after-hours suggests that the MMs couldn't pick up enough shares to complete their delta-hedging at the closing cross and had to continue buying after-hours.

I'd be glad to predict TSLA's short-term price movements in this environment. Just buy me a dart board, please. Long term, though, TSLA has a strong second half of 2022 coming and a super-strong 2023 on the horizon. Fortunately, the market has lost most its fears about Elon's sale of shares, as suggested by Monday afternoon's strong TSLA performance. One of the other dissipating fears, Giga Shanghai's performance in Q2 after its shutdown and China's current Covid 19 situation, is being addressed in the news below.

Coming events:
* About 2:30pm on Wednesday the Fed will announce their plans for interest rate hikes in May

News:
* Tesla's annual shareholders' meeting will be Aug 4 in Austin, TX
* Teslarati says Tesla Giga has resumed over 80% production
* A Chinese official says Tesla's monthly vehicle production should rise to 90,000 after a June expansion

With 59% of selling tagged to shorts, someone clearly didn't like seeing TSLA rising and was trying to slow the climb down.

10 yr. treasury bond yields exceeded 3% for a few minutes Monday afternoon then closed at 2.99%. Perhaps a slow drift above 3% on Tuesday might not be as frightening as I anticipated

Max pain Monday morning was 930. TSLA proceeding in this direction is good for market makers since the 6K high put wall at 900 has been rendered out of the money for the present time. Market makers would prefer to keep TSLA below the 950-strike call wall, however, and particularly below the 1000-strike call wall.

As TSLA looked ready to rise above 900, call options at this strike traded furiously.

Check out the past four days of trading. For the most part TSLA has been sandwiched between the lower bollinger band and the 200 day moving average.

Conditions:
* Dow up 84 (0.26%)
* NASDAQ up 201 (1.63%)
* SPY up 2 (0.60%)
* TSLA 902.94, up 32.18 (3.70%)
* TSLA volume 24.7M shares
* Oil 105.6
* IV 65.6, 85%
* Max Pain 930
* Percent of TSLA selling tagged to shorts: 59%

 

[khorton]

View attachment 799987
TSLA chart above

View attachment 799990
QQQ chart above

Was Monday's macro trading about panic selling or about FOMO? Once again, it was about both and you would be well advised to take a Dramamine if watching the market progression. The up and down market in the morning gave way to a down NASDAQ in the afternoon. Then, as TMC's @Discoducky said, TSLA hit a 52 week low on Monday and then bounced off a critical support level. Although the Dow gained a mere 0.26% for the day, the NASDAQ rose 1.63% and TSLA levitated 3.7%. Obviously, the big afternoon action was in tech stocks and TSLA rose more than it's typical 2.1X multiplier to the NASDAQ.

The day saw lots of shorting, enough for 59% of all selling to be tagged as short. When you think about it, with the NASDAQ at a 52 week low and the market suddenly turning higher, adding to one's TSLA short position didn't make sense as an investment decision today. Rather, Monday's high level of shorting was short term efforts for quick profits or for manipulations.

Monday afternoon's big rally in the final hour left the market makers scrambling to catch up with their Delta-hedging. Fortunately for them, that huge put wall at 900 has at least for now been rendered out of the money. We saw 665K shares trade at 4pm, suggesting some covering from day-shorting plus some delta-hedge buying by the market makers. The stock's continued rise in after-hours suggests that the MMs couldn't pick up enough shares to complete their delta-hedging at the closing cross and had to continue buying after-hours.

I'd be glad to predict TSLA's short-term price movements in this environment. Just buy me a dart board, please. Long term, though, TSLA has a strong second half of 2022 coming and a super-strong 2023 on the horizon. Fortunately, the market has lost most its fears about Elon's sale of shares, as suggested by Monday afternoon's strong TSLA performance. One of the other dissipating fears, Giga Shanghai's performance in Q2 after its shutdown and China's current Covid 19 situation, is being addressed in the news below.

Coming events:
* About 2:30pm on Wednesday the Fed will announce their plans for interest rate hikes in May

News:
* Tesla's annual shareholders' meeting will be Aug 4 in Austin, TX
* Teslarati says Tesla Giga has resumed over 80% production
* A Chinese official says Tesla's monthly vehicle production should rise to 90,000 after a June expansion


View attachment 799991
With 59% of selling tagged to shorts, someone clearly didn't like seeing TSLA rising and was trying to slow the climb down.

View attachment 799993
10 yr. treasury bond yields exceeded 3% for a few minutes Monday afternoon then closed at 2.99%. Perhaps a slow drift above 3% on Tuesday might not be as frightening as I anticipated

View attachment 799988
Max pain Monday morning was 930. TSLA proceeding in this direction is good for market makers since the 6K high put wall at 900 has been rendered out of the money for the present time. Market makers would prefer to keep TSLA below the 950-strike call wall, however, and particularly below the 1000-strike call wall.

View attachment 799989
As TSLA looked ready to rise above 900, call options at this strike traded furiously.

View attachment 799992
Check out the past four days of trading. For the most part TSLA has been sandwiched between the lower bollinger band and the 200 day moving average.

Conditions:
* Dow up 84 (0.26%)
* NASDAQ up 201 (1.63%)
* SPY up 2 (0.60%)
* TSLA 902.94, up 32.18 (3.70%)
* TSLA volume 24.7M shares
* Oil 105.6
* IV 65.6, 85%
* Max Pain 930
* Percent of TSLA selling tagged to shorts: 59%

it was NASDAQ that hit the 52 week low, not TSLA

 

[Papafox]

it was NASDAQ that hit the 52 week low, not TSLA

Thanks for pointing out the typo and it is now corrected. I meant NASDAQ. TSLA doesn't make sense at all in this statement. It's all about doing the posts late at night when I am tired. Sigh.

 

[traxila]

Thanks for pointing out the typo and it is now corrected. I meant NASDAQ. TSLA doesn't make sense at all in this statement. It's all about doing the posts late at night when I am tired. Sigh.

I need to get tired late at night like you instead of sawing wood.

YOU ARE AWESOME!

 

[Papafox]

TSLA chart above

QQQ chart above

On Tuesday TSLA and QQQ traded in relative unison, but with TSLA showing noticeably more strength. QQQ made at least 10 dips into the red during the day and yet TSLA (with the exception of the Mandatory Morning Dip) barely wandered into the red. Of particular note was TSLA's outperformance of QQQ during the closing minutes of market trading.

TSLA traded below average volume with 21M shares changing hands. With percent of selling by shorts at 58%, the reasonable conclusion is that effort was placed toward reducing TSLA's climb today. My overall feeling is that the market remains jumpy, not entirely sure if the bottom is in but also we see FOMO generated when TSLA rises. The Fed will report their May interest rate plans Wednesday afternoon.

The big news is that various indications suggest that Q2 might be better than expected and an announcement of more growth in Shanghai is likely coming (see discussion below green chart).

10 yr. treasury bond yields began the day down from Monday's near 3.0% close but crept up to 2.97% at day's end

The percent of selling by shorts chart shows the second day in which manipulations are underway, as indicated by the number being near 60%

Max pain on Tuesday morning was 900, which is 30 less than Monday mornings number. Usually max pain rises with stock price, but in this case you can see that at the 900 strike we saw calls rise from about 3K contracts to nearly 18K contracts. Puts had dominated 900 and now calls ruled. Yep, that type of a change will indeed affect max pain.

Let's zoom out for a second and look at the bigger picture. On Jan 1, 2021 TSLA was trading at 793. Sixteen months later it's trading at 909. That's a gain of only 116 or less than 15% over a period of time when we've seen the recent period of Tesla quarterly results rising one after another with profits rising even faster than vehicle deliveries. Clearly, TSLA is going to make an upward break at some point because the spring has tightened and 2nd half of 2022 is looking really strong. Catalysts such as a stock split and the company debt being raised above junk grade are coming.

Now consider news for today:
* Teslarati reports that Trip Choudhry has been keeping an eye on Fremont and believes it has been "running 10-20% above capacity"
* Both Rob Maurer and Dave Lee spoke on their podcasts Tuesday about a Reuters article that mentions a Chinese report about a coming 2nd Tesla factory in Shanghai that will eventually be able to produce 450,000 vehicles/yr. We could hear Tesla announce the new factory at its annual meeting in early August or sooner. Once again, analysts are going to have to revise their numbers upward to account for additional growth by TSLA. Bottom line: remain on the sidelines at your own risk.

Looking at the tech chart, Tuesday's trading fit well with the trend of the market makers and hedge funds keeping TSLA from trading above the 200 day moving average. Actually, TSLA's spurt in the final minutes of the day brought it about $3 above the 200 day moving average. Let's hope there's a real pop sometime this week as TSLA convincingly breaks the shackles.

Conditions:
* Dow up 67 (0.20%)
* NASDAQ up 28 (0.22%)
* SPY up 2 (0.46%)
* TSLA 909.25, up 6.31 (0.70%)
* TSLA volume 21.2M shares
* Oil 103.0
* IV 65.1, 82%
* Max Pain 900
* Percent of TSLA selling tagged to shorts: 58%

 

[Papafox]

TSLA chart above

QQQ chart above

Congrats, longs, TSLA took advantage of late-day macro exuberance and rose above 950 on Wednesday, thereby squashing the dastardly plot of the market makers to keep TSLA below the 200 day moving average. In pre-market trading, TSLA traded in the red while QQQ was green, but once the market opened TSLA traded mostly in step with QQQ.

In late afternoon Jerome Powell spoke. Rob Maurer here in his podcast did a very nice job of breaking down the pertinent points and market reactions. As I see it, the market was nervous about the talk, and ok with the expected May 50 basis point increase in rates. It couldn't make up its mind where to head, however. Then, when someone asked about the possibility of 0.75% raises in the future and Powell basically said no, the market went nuts and rallied hard into the close. Futures now look so-so. Sometimes I think the market is on drugs, sheesh. The importance of the day is that the market is now one step closer to leaving behind its excessive fear of rate hikes and allowing tech stocks to recover.

On Tuesday's post I mentioned the small 15% gain of TSLA in 16 months since Jan 1, 2001, and pointed out the enormous and steady increases in deliveries and profits in recent quarters. Compared to the previous 16 months when TSLA rose more than 1500%, the contrast is striking. I continue to believe that a big part of the reason for TSLA's coiled spring behavior is that the various big Wall Street players including market makers make a lot of money selling TSLA options when it looks so ready to run higher and yet they manage to constrain that big breakout and pocket their profits. Alas, sooner or later the stock gets away from them (or they let it get away from them) and it's off to the races again.

Nonetheless, I felt that mentioning the huge quarterly gains we've seen in recent quarters was not enough to emphasize the progress, so here are a few more huge developments during the past 16 months:
* TSLA built and has now opened Gigafactories in Berlin and Austin
* The Shanghai Gigafactory has stunned Tesla watchers during this time period by outperforming Fremont and now we hear strong rumblings that a major sister factory is coming
* Full self driving has grown from a highway-only program to something that navigates city streets. It's not done yet, but we're seeing the same kind of rapid improvements that we saw with the highway-only version that led to the software being enormously important for safety and utility. Although Wall Street fails to give value to FSD's potential, we know that whether it's robotaxis or just lots of margin tagged on to new vehicles sold with FSD, value is coming but not yet baked into the stock price.
* Tesla Energy has been the perpetual underperformer but we're now seeing profitability rising in the latest quarter to near the break-even point as Tesla energy finally is poised to start becoming part of Tesla's regular profits.
* The Tesla bot is in very serious development and could begin producing revenue in 2023. As the bot evolves, it could become enormously in demand and command high margins. For now it's a sleeper, like FSD.

So, this is the lineup for the company we own. The spring is indeed getting coiled and the only question is not if but when that tension will be relieved.

With percent of selling tagged to shorts at 61%, there's good reason to believe that market makers were working TSLA today to reduce the gains

After the Fed made its announcements, yields on 10 year treasury bonds fell to 2.92%.

For the second morning in a row, TSLA's max pain was 900. You can see puts and calls at 900 evenly matched, so there's no real incentive for market makers to push below 900. The 950 strike has about 4K calls, but it's nothing compared to the 18K call wall at 1000.

Despite 950 and 1000 showing heavy call trading on Wednesday, 950 strike closed with a relatively low 4K calls of open interest

Here's the interesting thing I see with the tech chart. The past three days of trading have all been positive. Moreover, percent of selling by shorts has been very elevated for the past three days. Methinks someone is using day-shorting to hold TSLA's climbs back this week. Notice that TSLA not only blew through the 200 day moving average but also rose above the 50 DMA as well. My wish list now includes TSLA rising above the mid bollinger band so that we can get the bands to turn upward, again.

Conditions:
* Dow up 932 (2.81%)
* NASDAQ up 401 (3.19%)
* SPY up 13 (3.05%)
* TSLA 952.62, up 43.37 (4.77%)
* TSLA volume 26.8M shares
* Oil 107.9
* IV 60.0, 78%
* Max Pain 900
* Percent of TSLA selling tagged to shorts: 61%

 

[Papafox]

TSLA chart above

QQQ chart above

The NASDAQ ran up 3% on Wednesday after a pretty much expected statement from the Fed, and then it ran down 5% on Thursday from that same pretty much expected statement. My general belief is that the powerful hedge funds weren't ready for the market to take off and so they pulled it back down today. How could a few hedge funds do such a thing? Some have at time been leveraging their capital more than 10X, creating a trillion dollars worth of trading power in a single company. Start shorting a few of the biggest and most volatile stocks in the NASDAQ (Amazon, TSLA, Microsoft, etc) right at open and two things happen: 1) other traders and bots (especially bots) notice the effects upon the NASDAQ and start selling, and 2) short-selling to initiate a deep dip is a very profitable enterprise if you cover by day's end.

Now let's look specifically at TSLA. With the NASDAQ down ~5%, we saw NVDA down 7.3%, AMZN down 7.6%, AAPL down 5.6% and ARKK down 8.9%. In that context, TSLA's dip of 8.3% wasn't all that out of whack, but it was on the high side. Consider if you were going to take the NASDAQ down with two or three big hedge funds selling like stink upon open, would you choose TSLA as a target? Of course you would, first because it is a very volatile stock because of all the options (and delta-hedging needed once the price starts to roll) and also because it is such a newsworthy stock. If you were driving TSLA down, you would likely try to avoid barely exceeding the 10% dip level, which would activate the alternative uptick rule, and TSLA's dip came very close but never exceeded 10%.

Of course everything I just said could be wrong. Yields on 10 yr. treasury bonds exceeded 3% on Thursday, and perhaps that move set up the fear that started the selling. TSLA as a stock that trades at a high multiple was, of course, one of the top losers.

On days when the market is nutty red for very little reason, I like to remind myself about how well Tesla is executing and all this noise in the short run will work its way out later in 2022 or in 2023 when Tesla's deliveries and profits absolutely stuns Wall Street. In the meantime, keep that seatbelt snug.

News:
* CNBC reports that Elon has secured at least $7 billion in additional funding for Twitter. That move greatly decreases the size of his margin loan (see, we knew this fear-factor would be squashed soon enough)
* Electrek reports that Tesla is looking to expand Berlin with a land acquisition

Want evidence that mischief was afoot today? Percent of selling by shorts rose to 63%

Yields on 10 year treasury bonds flirted with 3.1% on Thursday before backing down to 3%. Thursday was the day the market threw its 3% tantrum

Max pain Thursday morning was 900 before the sugar hit the fan. By this open interest chart, the market makers would want to keep TSLA below 890 on Friday, but of course updated numbers will be out on Friday that will guide the end of week manipulations

Here is Thursday morning's chart of option volume that took place on Wednesday

Easy come, easy go. TSLA is back singing the below 200 DMA blues.

Conditions:
* Dow down 1063 (3.12%)
* NASDAQ down 647 (4.99%)
* SPY down 15 (3.55%)
* TSLA 873.28, down 79.34 (8.33%)
* TSLA volume 30.3M shares
* Oil 108.0
* IV 68.6, 95%
* Max Pain 900
* Percent of TSLA selling tagged to shorts: 63%

 

[Papafox]

TSLA chart above

QQQ chart above

On Friday the broader markets and particularly the NASDAQ performed poorly as the NASDAQ extended its Thursday selloff to hit another 52 week low. The NASDAQ closed down 1.4%. Positive job growth numbers gave the market some shivers as it contemplated that good news might give the Fed inspiration for a .75 point interest rate hike in June. My personal view is that the market is afraid of its own shadow at this point, with a strong possibility that some bad actors are throwing gasoline on the fire so that they can profit from the volatility.

Fortunately, TSLA outperformed the NASDAQ on Friday, spent much more time trading in the green, and closed down 0.87%. This outperformance of the NASDAQ was despite high percent of selling by shorts numbers, which suggest negative manipulations on the stock price each day. Manipulations were needed because this past week was looking to be the recovery week following Elon's TSLA selling spree the previous week. If you refer to the top of the 4 max pain charts below, you'll see that if market makers were shooting for a close below the price where call options dominate, they'd want TSLA below 880 on Friday close. A close around 865 really suited their needs very well because it was also above the last put hill at 860-strike. I suggest that trading days (or weeks) when there is market uncertainty is unfortunately a good environment for successfully manipulating TSLA stock.

News:
* Tesla has released it's annual impact report. I think Rob Maurer did a good job of highlighting the report in this podcast.
* Tesla expects to raise Shanghai Giga output to 2600 vehicles/day in mid-May, according to this Reuters Article. Rob Maurer in the above podcast and various TMC members have been working the numbers and suggest it would be difficult but not impossible for Tesla to match their Q1 2022 output.

What's fascinating is that throughout this past week, all 5 days worth, TSLA saw highly elevated percent of selling by shorts. We jumped from 48% last Friday to 59%, 58%, 61%, 63%, and then 61%. Those numbers suggest manipulations were done to push TSLA lower, and it looks like a concerted effort to hold TSLA back on the up days and day-short the stock early to make money on the down days.

TSLA ended the week on climbing 10 yr. treasury bond yields, with a close a 3.1% on Friday

Max pain on Friday may have been 900, but the transition point from puts dominating to calls dominating was just below 880, but to avoid rewarding the put buyers too much there was a need to close above 860. Thus, a close at 865 worked out to be very close to maximum profits for the option sellers.

Thursday's option volumes

Looking at the weekly max pain chart (courtesy of @JimS ), you can see that the week of Apr25-29 was the big hit due to Elon's selling to buy Twitter, and this past week was to have been the recovery week, except the macros went in the dumpster for NASDAQ stocks on Thursday and TSLA actually closed down for the week.

Max pain for this coming Friday is 915. Looking at the max pain chart above, you see slightly more calls than puts at 900 strike, but otherwise you have to look all the way up to 940 to find solid domination by calls.

The past two weeks have been the battle to rise above the 200 day moving average after the deep dip that began the "Elon is selling TSLA shares" worry two weeks ago.

For the week, TSLA closed at 865.65, down 5.11 from the previous Friday's 870.76. Hoping you enjoy your weekend.

Conditions:
* Dow down 99 (0.30%)
* NASDAQ down 173 (1.40%)
* SPY down 2 (0.60%)
* TSLA 865.65, down 7.63 (0.87%)
* TSLA volume 24.2M shares
* Oil 109.8
* IV 67.7, 93%
* Max Pain 900
* Percent of TSLA selling tagged to shorts: 61%

 

[Papafox]

TSLA chart above

QQQ chart above

Monday's TSLA trading is a pretty short story. The market is extending its overreaction dip to fear of inflation by punishing tech stocks beyond reason. While the Dow was down only 1.99% on Monday, NASDAQ lost 4.29%, TSLA down 9.07%, NVDA down 9.24% and ARKK down 9.86%. Comparing TSLA to the NASDAQ, TSLA was down 2.11X vs. its normal 2.1X beta.

What's noteworthy is that this pummeling of the tech stocks has been so overplayed that it is now reaching ridiculous levels. It's a shame that at this point most of us have been buying the attractive dips already and have little dry powder left. Oh well, HODL works fine.

So, what does a reasonable response to rising interest rates look like? Consider Gary Black's response:

Gary dropped his TSLA price target from 1600 to 1500 to account for increased interest rates

If you are new to investing in TSLA, please realize there are bottoms to these kind of dips and better days lay ahead. Once we recover you'll be able to honestly say at the next TSLA threat, "Hey, this isn't my first rodeo." Dips like this are a sort of rights of passage to become a seasoned TSLA investor. Unless you've been investing in options that are too aggressive or expire too soon, or you've overused margin, you'll be fine. The same cannot be said for shorts, who may be smiling on Monday but who consistently lose billions EVERY year. 2022 should be no exception.

Fortunately, 10 yr treasury bond yields dipped slightly on Monday to below 3.05%

TSLA selling by shorts is still very much in the elevated area (56%). No doubt some hedge funds were again making profits by shorting the dip and covering before day's end.

Max pain is listed as 905. It's possible we could see that number if there's a big turnaround early this week, but in the absence of a turnaround take a look at that monstrous put wall at 800. Market makers would definitely want to close above 800 on Friday.

Here's Friday's options volumes

Right now tech stocks are trading in blind obedience to the NASDAQ and technicals at individual stocks mean less than the effects of the NASDAQ upon trading. Consequently, TSLA managed to close about 18 below its lower bollinger band on Monday.

Conditions:
* Dow down 654 (1.99%)
* NASDAQ down 521 (4.29%)
* SPY down 13 (3.20%)
* TSLA 787.11, down 78.54 (9.07%)
* TSLA volume 29.7M shares
* Oil 101.8
* IV 76.3, 98%
* Max Pain 905
* Percent of TSLA selling tagged to shorts: 56%

 

[Papafox]

TSLA chart above

QQQ chart above

After a couple brutal down days on the NASDAQ TSLA investors were greeted with a volatile up day in both NASDAQ and TSLA that rallied on open, gave up its gains in late morning, and then rose into the close. Notice the plateau on the TSLA chart from about 2:30pm until about 3:15pm. I had expected market makers to encourage TSLA to remain above 800 in order to pull the large number of 800-strike puts out of the money, and that plateau looks to be an attempt to keep TSLA above 800 as someone was selling TSLA in the afternoon. Notice how close to the red/green line TSLA got a few minutes before close, compared to the QQQ chart. Looks like a bit of a battle that was not present in QQQ during the final minutes of market trading as TSLA broke below the plateau, headed dangerously close to the red/green line, then was somehow elevated back above 800 for the close. Ah, the games the pirates play against each other some days.

Kudos to @StarFoxisDown! for posting this excerpt from Twitter regarding the very extensive selling that Cathie Wood has done of TSLA shares lately. That selling will explain some of the downward pressure on TSLA lately. Cathie has retained strong conviction on TSLA but what she's been doing is taking money out of the stock that has held up the best during this downturn and moving it into the stocks that got hammered the most (and that she still believes have a future). She's trying to leverage the upside of the dip recovery. In theory she'd move some money back into TSLA after the laggards rise substantially, but that could be a long, long wait, during which TSLA will likely make an outsized upward move itself.

What TSLA and other tech stocks do the remainder of the week will likely be mostly affected by inflation numbers coming out Wednesday and Thursday. The Wednesday CPI numbers will be released before start of market trading on Wednesday

News:
* The Financial Times Future of the Car interview of Elon took place on Tuesday and was quite long. Solving the Money Problem's podcast on Tuesday gave a heavily edited version of the interview for TSLA investors which nonetheless covered the important points. Recommended. My favorite part was Elon's saying that demand is currently "Ridiculous".
* Reuters reports that TSLA produced 10,750 vehicles from Giga Shanghai in April, a month with most of the potential production days lost to a Covid 19 lockdown. Altogether, that was pretty good. Reuters being Reuters they worked to spin the story in the most negative fashion possible. A better source for the story would be this Tesmanian post.
* The Reuters article above also referenced TSLA producing only about 200 vehicles as a Chinese supplier of wiring harnesses was unexpectedly locked down for Covid 19. Rob Maurer's Tesla Daily podcast gave information about the effects of the supplier issue, and Elon in his interview mentioned that China is coming back up fairly quickly and he didn't expect much in the way of supply chain interruptions in the coming weeks.

Perhaps part of the reason for the green we saw on Tuesday was caused by the 10 yr. treasury bond yield falling below 3%. It closed at 2.99%.

Here you can see percent of selling by shorts returning to a more typical number falling the last week of manipulations. Market makers want TSLA to rise to about 860 this week, so they are not shorting. Tuesday was an overall rising day for TSLA and so hedge funds would not have an easy time shorting the dips. Thus, far less demand for day-shorting. The exception would be the play we saw at day's end as someone was trying a pushdown into close and the market makers overruled the move by pushing TSLA back above 800 for the close.

Max pain is listed as 860. You might instead see the market makers try to keep TSLA below 850, due to the nearly 5000 850-strike call contracts open.

Monday's option volumes

Looking at the technical chart, the positive trading on Tuesday lifted TSLA above the even number 800 as well as above the lower bollinger band.

Conditions:
* Dow down 85 (0.26%)
* NASDAQ up 114 (0.98%)
* SPY up 1 (0.23%)
* TSLA 800.04, up 12.93 (1.64%)
* TSLA volume 28.0M shares
* Oil 99.65
* IV 72.5, 97%
* Max Pain 860
* Percent of TSLA selling tagged to shorts: 49%

 

[Papafox]

TSLA chart above

QQQ chart above

Mercy, Wednesday was a nasty day for tech stocks and for TSLA in particular. The NASDAQ closed down 3.18% and TSLA down 8.25% on high volume of 31.7M shares. Before market open, the CPI numbers were released. Rob Maurer did a good job breaking down those numbers in his podcast, but the bottom line was that even though the results were close to expectations, some of the results, such as the index of all items less food and energy, rose 0.6% in April whereas we saw a 0.3% month over month rise in March. Initially, the market gave a light sigh of relief because the numbers weren't too bad, we even saw some trading in the green, but as afternoon approached the NASDAQ started heading steadily down as the market did its usual when-in-doubt-panic-sell maneuver.

Normally, TSLA dips about 2.1X the NASDAQ's dip, but on Wednesday it was down about 2.6X. Why the extra? Part of the answer is that TSLA has lots of put options outstanding that have necessitated the market makers to do additional selling because they've come into the money and their deltas have changed. The hedge funds know this and so they are likely shorting TSLA in the descent and covering at day's end (volume at 4pm minute was over 600K shares traded) for a very tidy profit.

One of the reasons why the market is so skittish these days is because of fears of "stagflation". I was a college student studying economics in the late 1970s when "real" stagflation occurred, so let me tell you about the differences. The catalyst for both the inflation and for a slowing economy back then was primarily caused by a large increase in the cost of middle-east oil. The cost of oil (and gasoline) affects the cost of just about all products, and so inflation perked up. Bad ideas such as gasoline price caps were tried. The Fed used fiscal and monetary policy to try and get the inflation under control and managed to slow the economy. Thus we had both high inflation and a slowing economy.

Check out the above chart of 30 yr. mortgage rates, which peaked at over 18% in 1981. The effect upon new home sales was enormous, leading to cascading economic troubles as suppliers of building materials, etc. and their suppliers felt the pinch. Imagine trying to start or expand a business and borrow capital in that environment.

Here's a chart of GDP over these years and you can see dips and recoveries throughout the decades. The point I want to make is that the increase in inflation that we're currently experiencing is concerning but not on the same type of scale as the "stagflation" of the late 1970s, nor the economic dips of 2000 and 2008. With 10 yr. treasury bond yields at 3%, affordable money is still available to businesses. Much current inflation is due to supply chain issues that are an artifact of the pandemic and those inflationary pressures are going to self-correct without a sizeable recession.

Instead, I think we are feeling the effects of the usual Wall Street big dogs adding to the dip and scaring investors out of the market in order to buy tech and other attractive stocks at blue-light-special prices. The market will recover when they start buying and force it higher. Please don't donate your TSLA shares to the pirates. TSLA is growing like no other top ten company the U.S. has ever known, it has nearly $20B cash and cash equivalents at its disposal, demand is "ridiculous, and the Covid lockdowns in China will be decreasing soon if we believe what Elon heard just days ago. Did I mention Tesla is making money like it's running a printing press?

We saw an uptick in percent of selling tagged to shorts on Wednesday as various short-sellers (hedge funds, etc.) sold the day's dip and covered by day's end for a tidy profit.

10 yr. treasury bond yields fell below 2.95% on Wednesday. As money moves from equities into bonds, there's demand for bonds, which pushes bond prices higher, which in turn lowers the yields. It's a temporary thing. We'll see the yields creeping back up soon enough. Personally, I shake my head at investors who hold equities until near the bottom of a deep dip, only to take that money out of stocks and place it in a low-income bond which insures that they don't ride the recovery from the dip back up again. Emotions don't work well with investing.

Max pain is listed as 840, which is now more than $100 above the current stock price. Don't hold your breath to see 840 this week. Instead, look at the put walls to guess how the market makers will want to see prices flow. I would expect them to try to avoid a dip below 700 because of the more than 11K puts expiring at that strike. If they can help ease the price above 750, they will.

Tuesday's options volumes

TSLA closed below the lower bollinger band yet again. At this point, the lower bb is just chasing the stock price and is not much help as a support level.

The PPI numbers come out on Thursday. You may wish to keep that seat belt snugged up a bit longer.

Conditions:
* Dow down 327 (1.02%)
* NASDAQ down 373 (3.18%)
* SPY down 6 (1.59%)
* TSLA 734.00, down 66.04 (8.25%)
* TSLA volume 31.7M shares
* Oil 105.8
* IV 79.9, 99%
* Max Pain 840
* Percent of TSLA selling tagged to shorts: 55%

 

[Papafox]

TSLA chart above

QQQ chart above

Although the change in price was modest, in every other way Thursday was a huge day for TSLA and the market, including TSLA volume of 46.8M shares. That's double the normal volume. We saw a big dip right after market open in both QQQ and TSLA, and we saw a pronounced mid afternoon dip in QQQ before it pulled itself up nearly to a break even finish. With both the NASDAQ and TSLA, you see elements of what I believe is an effort to continue the downtrend a bit further, and in both you see a rejection of those attempts. Friday should be a very positive day for both, provided massive FUD is not introduced.

The day began with the Producer Price Index results, which were somewhat better than expectations. Please reference this podcast by Rob Maurer (1:00 minute in) or this post by TMC's @The Accountant. My overall impression is that the market makers didn't allow TSLA to spend much time at all below 700. Of particular note is the TSLA climb after hours to nearly the red/green line, a move that didn't happen with QQQ.

For the NASDAQ, we saw stocks that had gotten off easily in recent days get hammered and stocks that had been hammered hard do better. NVDA closed down 2.74% and AAPL was down 2.69%. In contrast, ARKK closed up 5.58% and ARKG up 5.13%. I believe there's room for recovery now in the NASDAQ because the fearful events (earnings weeks, Fed meeting and comments, CPI & PPI updates) are now behind us for May. With May having been a bigger inflation month back in 2021, the May 2022 CPI and PPI numbers should look relatively better come June. Nonetheless, there are entities out there such as hedge funds and big shorts who would like to see the dip continue, and so a battle in QQQ as well as TSLA.

Looking specifically at TSLA, in Rob Maurer's podcast we learned that the Covid issue at the part supplier that impacted Tesla has now been resolved and Tesla should soon be back to the 1200 vehicles/day number. As for fear of Elon's acquisition of Twitter possibly causing Elon to experience a margin call in the event of a deep TSLA dip, we learned in this Electrek article and elsewhere that Elon is looking at funding alternatives that might avoid additional margin loans on his TSLA shares. In other words, things are going well in the Teslasphere.

Fingers crossed that Thursday was the bottom of the dip and we get a nice bounce on Friday.

10 yr. treasury bond yields dipped to below 2.9% on Thursday

Max pain is listed as 800, which should be the first price point where market makers set up resistance and try to prevent TSLA from crossing on Friday

Volume chart

Looking at the tech chart, TSLA closed just above the lower bollinger band. Let's hope TSLA rises quickly to the 200 day moving average or higher so that the blue 50 DMA doesn't descend through the red 200 DMA in a "death cross".

Conditions:
* Dow down 104 (0.33%)
* NASDAQ up 7 (0.06%)
* SPY down 0 (0.10%)
* TSLA 728.00, down 6.00 (0.82%)
* TSLA volume 46.8M shares
* Oil 106.9
* IV 83.0, 100%
* Max Pain 800
* Percent of TSLA selling tagged to shorts: 51%