Papafox's Daily TSLA Trading Charts

[Papafox]

Today was a day that made me even more bullish on TSLA. Here's why. The shorts clearly added selling to the mandatory morning dip as the plunge in the NASDAQ got things going. As the NASDAQ recovered, so did TSLA, but it did better during the rough morning hours than all the other tech stocks I follow. By 2:00pm TSLA was ready to head into the green, but what appears to be capping by the shorts held it down. Taking a look at the percentage of selling done by shorts today, you can see it is way, way up at 61%. In other words, today the shorts had to expend lots of energy to get very little return. They lost money today on the massive MMD effort. Today was going to be their beginning of the downturn for TSLA but it just didn't work very well for them.

The NASDAQ had a big plunge to about 10am and then spent most of the day recovering. This is a bad environment for manipulating a stock if you are a short. A much better setup is a high start to the day, in the green, then falling macros so that any selling earlier in the day can be covered later in the day at a profit. Today was just the opposite.

Shorts did 61.28% of TSLA selling today. In other words, the manipulators have returned with a vengeance.

Looking at the bottom of the tech chart, you can see that we've seen 2 green days, 1 red, 3 greens, 1 red, 3 greens, 1 red so far in this climb. Although the cycle suggests tomorrow would be green, I wouldn't hold my breath with it being election day. Instead, I suggest we look for green on Wednesday, Thursday, and Friday if the cycle holds. Don't bet money on this. Let's just see for grins what happens.

TSLA has been flying into a headwind with bad macros during the past two weeks. The elections should remove uncertainty and encourage good macros later this week.

Conditions:
* Dow up 191 (0.76%)
* NASDAQ down 28 (0.38%)
* TSLA 341.40, down 5.01 (1.45%)
* TSLA volume 7.7M shares
* Oil 63.00, down 0.10 (0.16%)
* Percent of TSLA selling by shorts: 61.28%

 

[Papafox]

Here's some supplementary reading to put a smile on your face before you go to sleep:

 

[Papafox]

Today was again one of those days when the shorts vs. longs tug-of-war played a major part. The opening mandatory morning dip, courtesy of our not-so-friendly short sellers, was deep and very short lived in large part because the NASDAQ zoomed up and TSLA followed it up. We then saw several attempt by TSLA to break 348 and hold it, but TSLA has now been repelled about 10 times in the past couple of weeks from crossing 348. It's definitely a line drawn in the sand that the shorts are defending. Around 2pm TSLA was hovering just below, getting ready for another assault when the NASDAQ experienced a big drop and bottomed out about 2:30pm. From there, the NASDAQ recovered quite well, but look at TSLA. being capped in level trading for half an hour and then after a short climb being driven down to slightly below the red/green line for the close. The NASDAQ was climbing, there was no news of substance, and so I think we can hand the shorts ownership of that dip into close.

What I notice is that when bulls or bears fail to achieve an objective, there typically is a counter-move. After the early morning MMD was defeated, TSLA easily climbed. After TSLA was prevented from holding 348 for the third or fourth time today, the stock was set up for a dip. Day traders packed up their shares and went home while shorts sold in and claimed a victory.

My prediction yesterday was that today would not be a green day for TSLA because of the election. I was surprised by the NASDAQ's strength, but the prediction nonetheless held. If we follow the same pattern of this two and a half week climb, three green days may lay ahead if the macros take delight in the election returns. Fingers crossed. A solid rally of the NASDAQ would help TSLA break through the defenses of the shorts set up at 348 and the stock would then have a pathway to climb higher once again.

Notice TSLA up $2 in late after-hours trading. Investors may be anticipating a broader market rally tomorrow from early returns and if that takes place 348 at TSLA could be just another number seen in the rear-view mirror. Hoping so.

Today's 2:20pm dip of the NASDAQ brought an end to TSLA's efforts to cross 348 today

Shorts sold 55.71% of TSLA today, a very high number when you consider that TSLA was green for the vast majority of the day.

Remember this tweet from Dusaniwsky yesterday? His clients include many shorts, and I think they were unhappy that he said things that could imply a short squeeze was possible.

Today's tweet from Dusaniwsky is, I think, an opportunity to calm the shorts and suggest that no matter what happens to the price, the shorts tend to hang in there. It suggests quite a different behavior than yesterday's tweet. I think today's tweet was an effort at damage control by calming his base of clients.

Conditions:
* Dow up 173 (0.68%)
* NASDAQ up 47 (0.64%)
* TSLA 341.06, down 0.34 (0.10%)
* TSLA volume 6.6M shares
* Oil 61.77, down 1.33 (2.11%)

 

[Stormy]

Ex-squeeze me. I just wanted to throw in my two cents on Dusaniwsky's comments...

I don't think his second comment was a retraction on the first at all. I think they tie together perfectly, actually. In the first, he said a squeeze would take the SP ballistic, but its very hard to tell at what price a squeeze would actually happen. When asked why its so hard to tell, he says its because the shorts have so far been holding on religiously no matter the losses, so nobody knows when their faith will falter.

Personally I think its an awesome psychological prison some of them have placed themselves into. They've made this claim so far and wide that Tesla's going down, that even when faced with the strong counter point of being proven wrong, they grasp for new straws to say "No, I'm still right. Trust me." They have to double down like that and hope it turns around. It's either that or go home with egg on their faces. And really, once you've already got an egg on your face, adding another doesn't change much.

I think the last big short claim is the 0.9B bond repayment coming up. I dont think we'll see the real squeeze until the Q4 ER shows how they are dealing with that. If Tesla kills it in Q4, guides positive going forward and issues the shares for the convertible bond, that should be it.

I think Tesla will pay off the bond though, throwing up some questions about running too close to the wire on their cash on hand. The shorts will also jump on the increasing accounts payable, which is obviously going to happen based on earning revenue before having to pay suppliers, which is the plan. Then after that it'll be funadamentals. "Sure they're profitable, but still not worth a 100M market cap. Sell!" There'll always be plenty of aspersions for shorts to cast. And the shorts who have the money to keep funding their losses could well maintain their position, because they've staked their reputations on it. In fact, as the price goes up, they might even add to it. As Papafox said before: Couldn't happen to a more deserving group. =D

PS. The 0.9B is also a concern for longs. As the price approaches 360, and presents Tesla with an option to not have to pay that back, more longs will jump in and run the price up. Expect heavy resistance from the shorts leading up to 360, but I think sentiment is positive enough after Q3 that above 360+ will be a self-fulfilling prophecy.

 

[Papafox]

Ex-squeeze me. I just wanted to throw in my two cents on Dusaniwsky's comments...

I don't think his second comment was a retraction on the first at all. I think they tie together perfectly, actually. In the first, he said a squeeze would take the SP ballistic, but its very hard to tell at what price a squeeze would actually happen. When asked why its so hard to tell, he says its because the shorts have so far been holding on religiously no matter the losses, so nobody knows when their faith will falter.

Personally I think its an awesome psychological prison some of them have placed themselves into. They've made this claim so far and wide that Tesla's going down, that even when faced with the strong counter point of being proven wrong, they grasp for new straws to say "No, I'm still right. Trust me." They have to double down like that and hope it turns around. It's either that or go home with egg on their faces. And really, once you've already got an egg on your face, adding another doesn't change much.

I think the last big short claim is the 0.9B bond repayment coming up. I dont think we'll see the real squeeze until the Q4 ER shows how they are dealing with that. If Tesla kills it in Q4, guides positive going forward and issues the shares for the convertible bond, that should be it.

I think Tesla will pay off the bond though, throwing up some questions about running too close to the wire on their cash on hand. The shorts will also jump on the increasing accounts payable, which is obviously going to happen based on earning revenue before having to pay suppliers, which is the plan. Then after that it'll be funadamentals. "Sure they're profitable, but still not worth a 100M market cap. Sell!" There'll always be plenty of aspersions for shorts to cast. And the shorts who have the money to keep funding their losses could well maintain their position, because they've staked their reputations on it. In fact, as the price goes up, they might even add to it. As Papafox said before: Couldn't happen to a more deserving group. =D

PS. The 0.9B is also a concern for longs. As the price approaches 360, and presents Tesla with an option to not have to pay that back, more longs will jump in and run the price up. Expect heavy resistance from the shorts leading up to 360, but I think sentiment is positive enough after Q3 that above 360+ will be a self-fulfilling prophecy.

Stormy, I pretty much agree with what you have to say here. What Dusaniwsky said in his second post does indeed make sense and is reasonable. The point I was making was not so much that I disagreed with what he said, but rather that I believe there was perhaps a certain amount of ulterior motive in saying what he did second time around. I was really surprised by the first post because even though he suggested he had no idea at what level a short squeeze could begin, he thought it would be a hum-dinger if it ever got going. I see that post as likely generating negative feedback from his clients, the shorts, because it could induce fear. His second post suggests that the shorts in TSLA are the most persistent and price resistant he has ever seen. I think that second post would take away a bit if the fear. Overall, I think we're both right here.

Now... to write tonight's chart posting. I've been working late, my friends but it's underway now.

 

[Papafox]

I marvel when educated people suggest that short-sellers have no real effect on the TSLA stock price. Am I to assume that there are so many longs just itching to get out of TSLA that any time we hit 348 they start selling? No, I don't think that for a minute. Do I believe that after TSLA has traded above 351 during the day the longs start selling hard at 348 the third or fourth time we go there? Nope. Shorts have drawn a line in the sand at 348 and have been throwing lots of resources to keep TSLA from crossing it. They can't hold it off indefinitely, but they can delay it. Take a look at the NASDAQ trading chart below. It has been a pretty even climb today. A tiny dip before 2:00pm gave shorts an excuse for a dip on steroids, and look at the dip down from 350. TSLA got its mojo back and reclaimed 350, but shorts couldn't let that stand and at 3:12pm we saw a sale of 31,000 shares in a minute to begin the dip to close.

Take a look lower at the tech chart and you'll see that 8 trading sessions ago TSLA nearly touched 348. We've spent the better part of two weeks taking 348 and today we closed a few cents above it. Expect another battle tomorrow as lots of promise lays ahead for TSLA and shorts continue to throw their most determined effort ever to keep the SP down. @Stormy made a good point in the post earlier today when he said he thinks more longs will come in once TSLA rises above 360 because the short thesis of TSLA running out of money when the March debt comes due will be doubly dead by then.

The game right now is that TSLA is vulnerable for a dip after it fails to hold 348 and shorts are working that weakness to max advantage. OTOH, a strong climb into close that takes TSLA into the mid 350s or higher would be the antidote.

Take a look at yet another anemic MMD this morning. Those first few minutes of the day have at long last become a reasonable buying opportunity as the dip going into 10:30am is something the shorts lack the ability to pull off easily any more.

The NASDAQ rose steadily today because the market likes gridlock in Congress with the Democrats controlling the House and the Republicans holding the Senate

Meanwhile, Option Sniper still believes TSLA will be hitting an ATH before end of year, but he made a more reasonable revision to his EOY target after the dip from the "funding secured" tweet. Personally, I would feel good with $396 going into 2019.

Look how high the upper bollinger band has climbed. Once this 348 battle is decisively won, the upper bb will be no object to climbing. Look at how many days touched 348 but couldn't hold it in the past 8 sessions. This battle for 348 has become a forced consolidation. If you compare 2013 with our current climb, these type of consolidations are normal.

Shorty did about 60% of TSLA selling today, bringing the manipulation factor way up again.

Conditions:
* Dow UP 545 (2.13%)
* NASDAQ UP 195 (2.64%)
* TSLA 348.16, up 7.10 (2.08%)
* TSLA volume 7.4M shares
* Oil 61.74, up 0.07 (0.11%)
* Percent of TSLA selling by shorts: 59.78%

Mod-edited to correct a whole lot of "248"s to "348". What was Papafox thinking?!?

 

[ggr]

It's worth saying again: THANK YOU FOR THESE CHARTS AND COMMENTARY.

 

[JeffreyY]

I love how it blasted through the 348 watermark today. Papa thanks again for taking the time every day to update your posts.

 

[Papafox]

Mod-edited to correct a whole lot of "248"s to "348". What was Papafox thinking?!?

Well, I should have known something was up when Jim Chanos dropped by the house last night and asked to use my computer "just for a minute."

 

[madodel]

Australian telecom exec Robyn Denholm will replace Elon Musk as chair of Tesla's board

Shouldn't this have TSLA rising more today? Or perhaps it just hasn't become knowledge enough yet among the financial analysts and public.

 

[SpaceCash]

Australian telecom exec Robyn Denholm will replace Elon Musk as chair of Tesla's board

Shouldn't this have TSLA rising more today? Or perhaps it just hasn't become knowledge enough yet among the financial analysts and public.

Tesla's rise (from this and STILL from Q3) is in the oven, rising like a yeasty loaf of gourmet bread. Shorts still exert constant downward pressure, but they are also now fueling the rise. We're on a launch trajectory. It will reach fair value in time. All the pressure is baked in, releasing slowly but surely

 

[Papafox]

Today was a low-volume wild ride that started with good news on a bad macro day. The NASDAQ was down all day but TSLA came alive after opening with a run to 357 at 10:04am before starting a slow fade.

The good news was that Tesla found the new Chairperson and she looks like a good choice. Robyn Denholm is currently a member of the board and she's a known quantity with Elon Musk, which is great. Her emphasis on long-term returns to Tesla shareholders makes her compatible with the current Tesla mission, and her history shows she a very capable person in business. Some investors feared that Elon might just try to eliminate the chairman's position as a way of messing with the SEC, but Denholm's appointment and her giving her present company 6 month's notice that she will be leaving makes it evident that Denholm is planning to make the Chairmanship her full time gig. The market was happy with this development and TSLA didn't even take time for a real MMD before heading into the 350s.

Other good news announced today was that Tesla has surpassed BMW in market cap. One of the reasons the shorts hoped to hold TSLA below 348 was because if it went much higher, it would become a $60 billion company again. TSLA climbed today, and it is now worth 60 really big ones.

The NASDAQ was down all day and closed close to 1% lower

The big story today was the strength of the opening and the eventual fade as the day progressed. Is this a surprise to anyone? We have two seemingly contradictory events happening simultaneously: shorts are slowly covering and some shorts are aggressively manipulating the stock price. The answer to this apparent contradiction is that there really are two kind of TSLA shorts: those who just want to make a fast buck, and those who really want to kill Tesla. The first group includes many chumps who were lured into shorting by the press holding hands with the celebrity shorts. Every day more get margin calls and head for the hills. The margin call issue may be why we see such ferocious tendency to buy when TSLA is heading up. The second group are likely big money connected with the mortal enemies of TSLA, and these are the ones I suggest are doing the manipulations. I just don't see much reason for the extreme lumpiness in TSLA's trading if there isn't a tug-of-war going on between longs and shorts. I see the dip that bottomed out about 20 minutes before close as an attempt to push the SP down to 348 and dispirit the longs. Fortunately, these end of day dips are becoming regular enough so that traders are waiting for them and as you can see, the stock price ran from 348 and change back up above 351 before closing.

One reason for the short manipulations now? Some shorts are exiting and it can take many days for a big short to get out. The manipulations minimize the gains of TSLA during this exit.

Yesterday I suggested the antidote to the 348 battle was an end of day run up to the mid 350s. We made progress today in creeping away from 348 and also showing that there are buyers right now ready to pay 357 or higher for the stock. What TSLA needs most of all is a day with a strong climb going into close, because it is unprofitable for a short to manipulate a stock that is steadily climbing into close. Here's hoping we get to see it soon, because such a climb into close would be a thing of beauty. In the meantime, beware of brisk climbs on opening on days with weak macros. It's a perfect recipe for profitable short manipulations.

Here's the latest Dusaniwsky chart of short interest at TSLA. You can see that the covering is substantial. Let's hope we can close with a big gain such as above 357 because then the margin calls pick up and we pave the way for additional appreciation.

Shorts sold 51.4% of TSLA stock today, according to volumebot.com

Conditions:
* Dow up 11 (.04%)
* NASDAQ down 40 (0.53%)
* TSLA 351.40, up 3.24 (0.93%)
* TSLA volume 7.1M shares
* Oil 60.72, up 0.05 (0.08%)
* Percent of TSLA sold by shorts: 51.4%

 

[Stormy]

Does anyone have any insight on how short margin calls work?

I mean if you get margin called as a long, the broker will sell *some* of your shares to bring your margin back into balance. Selling shares puts cash in the account and reduces the risk (to the broker) of the falling share price.

But from the short side, buying back shares eats capital. So when a short gets margin called, does that mean the broker will buy back *all* the shares they've shorted?

Then there's the question of when. I understand the closing price at the end of the day is used to determine whether an account is still within margin limits. I'm assuming margin calls don't take place in after market... so first thing the next day? I believe my broker gives me three days to add cash before they kindly sell my shares for me, but I imagine they wont wait so long if the price moves too drastically. If it is bought back at the start of the next trading day, would this start causing the reverse MMDs we've been seeing some days?

If so, i think we should call them SBSs...
Short Burn Spikes. =D

 

[Sudre]

I am not sure how that works but I don’t think you can borrow money (use margin) to barrow shares. You have to cash purchase the short. Then if you can’t make your interest payment or the risk level goes too high you are then forced to cover the short. The margin side is possibly on the other side of the equation. Your other long shares in other stuff. If you had NFLX on margin and TSLA shorted.... well that would be bad I would think.

 

[neroden]

*Sigh* I'm tempted to buy some of those bonds

Does anyone have any insight on how short margin calls work?

I mean if you get margin called as a long, the broker will sell *some* of your shares to bring your margin back into balance. Selling shares puts cash in the account and reduces the risk (to the broker) of the falling share price.

But from the short side, buying back shares eats capital. So when a short gets margin called, does that mean the broker will buy back *all* the shares they've shorted?

OK. This confused me too, but I think I understand it better now. So suppose (and I believe this is the case for TSLA) that the maintenance margin is the same as the initial margin.

The initial margin equity requirement for a short sale is equal to 150% of the value of the shares sold short. So all of the proceeds of selling it, plus 50% more, have to be held in the account.

Covering a short sale reduces the amount of this extra 50% which has to be posted.

It's a bit confusing if the maintenance margin requirement is different, and it's usually lower than the initial margin requirement, but I've noticed than on Tesla most brokers have high maintenance margins on TSLA for long buyers, and I'd expect the same for short sellers.

----
Anyway, worked example, assuming maintenance margin is the same as initial and the short-seller doesn't have any positions other than TSLA and cash (bad assumptions, but you get the point):

Short-sell 100,000 shares of TSLA at $250. Receive $25 million cash for selling. Must post $12.5 million in extra equity, for a total of $37.5 million cash.

TSLA goes to $350. Now the equity requirement is $52.5 million. The short-seller gets margin-called and must put $15 million additional into the account.

If he can't do that, he could cover 90,000 shares of TSLA at $350, spending $31.5 million and ending up with $6 million cash in his account. With only 10,000 shares short, his equity requirement is 10,000 * $350 * 1.5 = $5.25 million, so he's OK again.

So no, they don't have to cover *all* their shares. But it can hurt pretty bad.

----
In the real world, short-sellers will not keep all that money in cash; they'll use it to go long stocks.

Which incurs margin interest, BTW. Took me a while to figure this one out, but if you use the cash from a short sale to buy stocks, you effectively pay margin interest on it. (If you keep all your collateral for the short sale in cash, then you don't.) If your cash balance is lower than the market value of the short sales, the difference is considered a margin loan -- so you can have a large cash balance and be paying margin interest if you have short sales.

Short-sellers generally won't cut as close to their margin requirements as my worked example. They'll start with significantly more than the "extra 50%". A typical "long-short" fund might have short positions equal in value to only about 20% of their long positions. This means their margin loan on which they pay interest is about 20% of the value of their long portfolio, and the margin equity requirement is only about 30% of the value of their long portfolio (as opposed to being 100% of the value of their long portfolio as in my worked example). This means the stocks they shorted can triple in value before they get margin-called.

For a fund, their internal risk management policies won't allow them to let those shorted stocks triple in value and wipe them out, so they will start covering the short positions when they start exceeding the allocation they're supposed to have (20% or whatever), long before they get margin-called.

 

[shlokavica22]

I believe 50% is not a constant and it relates to the volatility of particular stock. It also can change after the fact.
That means some shorts (it holds true for longs as well when the stock is in the other direction) that have "comfortable" margin at the moment, might be suddenly margin called when TSLA jumps suddenly and the margin requirement is increased.

 

[neroden]

Then there's the question of when. I understand the closing price at the end of the day is used to determine whether an account is still within margin limits. I'm assuming margin calls don't take place in after market... so first thing the next day? I believe my broker gives me three days to add cash before they kindly sell my shares for me, but I imagine they wont wait so long if the price moves too drastically.

You are correct, more or less.

If you fall below the margin requirements, brokers have discretion to margin-call you whenever they want. As a courtesy, they will usually give you several days to put more money in your account, but they don't have to.

They can close your positions midday in reaction to fast stock price movements. They aren't even required to call you, though for reputational reasons they always call you (that's why it's a "margin call"). However, sometimes with fast-moving markets you may have less than 10 minutes to instruct them to sell different stocks rather than selling whatever they want to.

Your only way of absolutely preventing this is to make sure you comply with the margin requirements at all times; to set yourself up so that you will not be margin-called in any plausible scenario.

I preemptively moved some stock from one broker's account to another during the recent dip, specifically because if there was a further dip, I didn't want the broker closing any of my short put options positions (which use margin equity) without asking me; I wanted to make sure the equity in the account was high enough that I would not be margin-called even if the stock temporarily droped to $100.

In practice, how long the broker gives you to put money in depends on whether they believe you have the money. Which also depends on how much money it is. If they know you have a billion or two stashed somewhere else, they're down with waiting for it. If it's a few hundred bucks and not likely to go much higher, they'll wait. If you look like an ordinary working stiff, and it's hundreds of thousands of dollars, and likely to double in the next couple of days, they're worried you're gonna default on them. If they think you're gonna default on them, they close your positions immediately.

 

[neroden]

I believe 50% is not a constant and it relates to the volatility of particular stock. It also can change after the fact.

It is certainly not a constant. The 50% is the standard "initial" margin, for opening a position. The "maintenance" margin requirement is different, and usually lower. There's a Federal Reserve / SEC requirement, but essentially every broker has higher "house" requirements than that for *all* stocks.

*And* each broker can set higher requirements on particular stocks. On Tesla, nearly every broker has set higher maintenance margin requirements than their usual "house" requirement for other stocks.

On Tesla, Schwab requires 50% maintenance margin equity for long purchases. (Vs. 30% on normal stocks.)

I don't know their maintenance equity requirement on short sales of TSLA, but 150% is an *informed* guess, since for normal stocks the short maintenance equity requirement was 130% last I checked (aka 100% + the long maintenance margin).

That means some shorts (it holds true for longs as well when the stock is in the other direction) that have "comfortable" margin at the moment, might be suddenly margin called when TSLA jumps suddenly and the margin requirement is increased.

While brokerages can adjust the maintenance margin equity requirement whenever they like, Schwab has left it at 50% for TSLA long purchases for years running. They don't actually like to adjust that percentage very often.

It is true that it might get bumped up from 150% to 160% or something similar. As I say, most long-short funds keep their short position much lower than that so they won't be margin called; they'll be forced to cover their positions by their risk assessment teams long before they're margin called.

Fools like Spiegel are another matter.

 

[Papafox]

It might be Sunday before I get Friday's charts and commentary posted. Lots of work competing with my Tesla efforts today. My overall impression of today's trading: TSLA showed lots of strength on a bad macro day with lots of mischief thrown at it by the shorts.

 

[AudubonB]

Hmm. Well, we may have to look into renewing your contract or not.