Today a significant sell-off of TSLA continued from last week. The extent of today's drop is a mystery to me because the broader markets were mixed and there was no Tesla news of significance that could justify the drop. I suppose concerns about Tesla's latest bond issue trading below par is considered a negative by some on Wall Street, but as one forum member said, the lower price may be more a statement about the bond market in general than in concerns for Tesla, specifically.
The big question is: where's the bottom?
* Option sniper suggests that TSLA may go as low as 334 before recovering. If we see a recovery tomorrow, his estimate was pretty good
* Looking at the technical chart below, you can see that of the past three days of red, today's close near the middle of the daily range is a big improvement over the previous two days, where the stock closed near the bottom of the daily range. A nice recovery leading into the close is a positive sign for the next day's trading
* I believe that TSLA has been falling primarily due to negative macros but also because of expanded participation by shorts in minimizing the climbs in good days and maximizing the drops in red days. Today's decline could, in large part, be simple momentum downward where long investors are waiting on the sidelines for someone else to catch the falling knives and they will jump in once the uptrend has been reestablished.
What do I expect for tomorrow? Nearly every green day for TSLA sees the stock green and climbing by 10:30am. For this reason, if macros are positive tomorrow I would expect the shorts to try to stage a mandatory morning dip. If the dip fizzles, or if it rebounds robustly, then the recovery well into the green could begin. Fundamentally, I see no reason for serious concern about Tesla. The Model 3 is highly praised by those who have driven it, the backorders are half a million strong, Musk is talking about a relatively quick transition into positive gross margins for Model 3, and after the $1.8 billion bond sale there's plenty of money in the bank to see the Model 3 ramp-up through until the car is generating loads of positive cash flow. We're told that Model S and X sales are doing well and the solar roofs are sold out for the foreseeable future. Production ramp-up, not demand for the products of Tesla, is where attention needs to be.
Regarding macros, consider:
* North Korea fears have receded. That situation can change rapidly, but for now people are relaxing because the leader of North Korea has backed away from strong rhetoric lately
* Terrorist events such as the one in Barcelona have a short shelf-life for affecting the stock market.
* Trump appears to be acting in a less-inflammatory fashion now that right-winger Steve Bannon has left the White House team. Although the official version of Bannon's departure is that Trump and Bannon see mostly eye-to-eye, the reality is that on issues that can kindle claims by the left of bigotry, prejudice, etc., Trump has been speaking more carefully. His comments following the Boston protests were more centrist and much more compatible with calming the populous than his comments after the Virginia events. Again, I think Bannon's departure is a reasonable explanation for some of the changes we see.
* Some well-known traders are suggesting "buy the dip"
Despite a large drop in the SP of TSLA today, take a look at the upper bollinger band. It is remaining in the mid 370s and provides lots of headroom for a run upwards when this stock turns around.
Conditions:
* Dow up 29 (0.13%)
* NASDAQ down 3 (0.05%)
* TSLA 337.86, down 9.60 (2.76%)
* TSLA volume 6.5M shares
* Oil 47.54, up 0.17 (0.36%)