Papafox's Daily TSLA Trading Charts

[cousinHub]

Yeah, but TSLA isn't that hard to borrow right now.

so I guess it's not hard to borrow for big hedge funds but not for retail investors right now (my US broker shows it as 'Hard to Borrow' since days/weeks (with some intermitent days when it's not)

I guess there's no free website that shows the interest rates charged to short-sellers on TSLA ?

 

[adiggs]

Yeah, but TSLA isn't that hard to borrow right now. When it starts to be hard to find shares, the brokerage (a) raises interest rates charged to short-sellers, inducing some of them to close their positions, and (b) starts paying interest (more and more) to people who lend their shares out, inducing more people to lend their shares out.

SolarCity got up to exorbitant interest rates: you could earn 12% lending it out. At that rate, a lot of people will lend their shares. Right now, TSLA lending isn't paying much of anything.

I've got some additional color to add. "hard to borrow" is a term with a natural meaning to regular folk, and a technical term with specific meaning to the industry (as best I can tell). Tesla is both hard to borrow, and not right now. From what I can tell, a good proxy for whether something is "hard to borrow" in industry terms is whether ANYBODY is actually lending out their shares at any interest rate above the risk free interest rate. I own shares in a small number of other companies and the only company that has ever had its shares lent out is TSLA (and the only one that has ever been classified as "hard to borrow").

If you're a short seller, I think the functional translation is you should expect interest rates to vary, and be "significantly" above the risk free rate, where "significant" can be as little as 1% vs. a risk free rate of a 1/4 pt or whatever.


It's actually easy to open a short position if your account is authorized for it. As @neroden points out, there are lots of levers the brokers have to pull on to find shares to satisfy your request to initiate a short position. They maintain a pool of shares so that small requests can always be immediately satisfied. They can raise the interest rate they charge to shorts (and that rate can change every day - it's not a fixed rate loan you're taking out when you borrow shares to short), where in the aggregate, increasing the rate will cause some of the shorted shares to be returned.

And they increase the rate they offer share owners to lend out those shares. I'd be a specific example - I've decided that being paid ~1.5% to lend out my shares, given the behavior I'm seeing in the market, is no longer adequate compensation. I'll be recalling my shares. My price to lend the shares out might be as high as 12% - I'm not really sure; only that it's higher than ~2%.


This is EDIT: NOT THE RIGHT an entirely reasonably thread to be asking about the mechanics of short selling (I thought I was in the Tracking Short Interest thread - that's where I would look and pursue this further ). Most of us in the thread are interested in short interest and/or lend our shares out, rather than borrowing shares to short sell. Understanding the mechanics is also interesting to us. There have been a number of posts over the last many pages of this thread talking about different bits and pieces of the mechanism as best we understand it. Finding them might be a little difficult though

 

[Papafox]

Today was a negative day for the macros and two pieces of news hurt Tesla: continued uncertainty about a potential trade ware with China and word that Softbank made a two billion dollar investment in GM's self-driving car division. Naturally, the short-sellers went to work making the most of the declines, with selling as high as 50,000 share in one minute's time at one point. Shorts pushed really hard at around two, the market rejected the dip, but shorts managed a decline during the final 20 minutes of trading.

Looking at the shorts as a percentage of TSLA selling, they were over 58% today, the second day in a row of higher percentage of selling. When TSLA was closer to the lower bollinger band, there was little money to be made by manipulative day-shorting, but once TSLA climbed up to the mid-bb, that situation changed, and then with negative macros and a little bit of bad news the shorts grabbed all they could get.

Need proof that shorts can trade 60% of TSLA day after day without increasing their short position? Dusaniwsky says short holdings in TSLA have actually dropped by a bit more than 2 million shares since early May. We know a portion of the short sell number we look at every day is run-of-the-mill daily management of holdings by market makers and the like. What we see here, though, is that for May the large quantities of short selling were mixed with slightly larger quantities of short covering. I like to think of much of that covering as clearing out the previous manipulative shorting balances of the day to free up resources for more shorting.

The good news? The author of this post on the Fremont parking lot (sorry, the factory still looks to be in paused mode), claims that a source told him that Tesla produced 560 Model 3s last Thursday. Multiply times 7 and you get 3,920. So... it looks like 4,000 M3/wk should fall next week with the Model 3 line reopened and when word of that accomplishment gets out, the SP should respond nicely. Enjoy the current TSLA sale while it lasts.

Lastly, here's a story on electrek.co where Germans disassembled a Model 3 and came to the opinion that the car could theoretically be built for $28,000 if Tesla was making 10,000/wk of them. Fred Lambert from Electrek asked Elon on Twitter about this number and he agreed that the number could be reached. Imagine the gross margin M3 could be producing then!

Conditions:
* Dow down 252 (1.02%)
* NASDAQ down 20 (0.27%)
* TSLA 284.73, down 6.99 (2.40%)
* TSLA volume 5.5M shares
* Oil 66.92, down 0.12 (0.18%)
* Percentage of TSLA selling by shorts: 58.4%

 

[neroden]

Next week is when we find out whether the upgrades this week eliminated all the <5000/week bottlenecks. If they did, it'll probably be announced at the shareholder meeting. If there's still a bottleneck, hopefully we can find out.

 

[Papafox]

Today the broader markets were up and news of the potentially excellent gross margins of Model 3 at full production became wider spread, leading to a very positive trading day. While we saw over 100,000 shares traded in the final minute of yesterday's market trading, we saw over 200,000 shares traded in the first minute of market trading today, suggesting to me shorts covering from yesterday's mischief and preparing for today's or just plain covering. With short percentage of TSLA trading down to 54% today, I suggest shorts are starting to lose optimism in the trajectory of TSLA.

Taking a look at the technical chart, you can see that since the most recent bottoming of TSLA in the 270s, TSLA has been moving higher at a moderate clip. This is a change from the quick upward runs to the upper bb that we've seen in the recent past but still a very positive development. For next week, we hope to see the upper BB move above 310 so that when the SP reaches that point the upper bb is not compounding the resistance that moving through 310 might bring. Shorts will once again try to defend 310 to avoid the run to 330 or 340 that could easily follow in short order.

For the week, TSLA closed at 291.82, up 12.97 from last week's 278.85. As I suggested earlier this week, the shorts are in a bind because I do not think they have the time to manufacture another dip of substance before the next wave of good Model 3 production rate news. This week's price action supports that theory. Word could come anytime next week through a leak or it might even come on Wednesday, June 6, during Tesla's annual meeting. Last week's big news was an M3 production rate reaching 3500/wk. Next week's announcement should include word that M3s are coming forth at a greater than 4000/wk rate. Soon thereafter Tesla becomes a cash-positive, profitable company. Things are getting interesting quickly and the pace can quicken considerably next week. Enjoy your weekend.

Conditions:
* Dow up 219 (0.90%)
* NASDAQ up 112 (1.51%)
* TSLA 291.82, up 7.09 (2.49%)
* TSLA volume 5.3M shares
* Oil 65.81, down 1.23 (1.83%)
* Percentage of TSLA selling by shorts: 54.1%

 

[defc0n]

Pretty good chance we will indeed see another battle for 310-312 next week. Might very well be another local top, but if not, 345 should come pretty soon.

If it doesn’t break through 312, then low 270s again at least would be my bet.

 

[EVMeister]

Loving the analysis as always. Just a small correction, the Shareholder meeting is on Tuesday 5th June not Wednesday 6th.

 

[Papafox]

Friday's chart didn't show up on my computer as I review the post and so I am placing it here for reference.Thanks for the correction of the annual meeting date, EVMeister.

 

[Papafox]

One development over the weekend is that a Needham group of analysts headed by well-regarded Rajvindra S Gill threw some cold water on TSLA by initiating coverage with a "hold" recommendation and suggesting that Tesla will not reach 5,000 Model 3s production ramp for another 12 months. Such a statement is music to the ears of the bears and we might see some fallout in the morning trading. On the other hand, word of Tesla's factory in Shanghai is apparently ready to become a major talking point. Normally, word of a China factory would send the stock price higher, but with no known funding for the new factory yet and the Needham report suggesting that Tesla will not reach free cash flow until 2020, we may see negative currents cancelling out the good news.

I find the timing of the Neeham note quite a coincidence because it is from a respected analyst who put out information right before the China factory announcement that casts doubt on the value of that China announcement. If Elon shares my concerns, he may let a cat out of the bag at Tuesday's Annual Meeting. These meetings are usually void of announcements that really move the stock price, but Elon might be so tired from the games being played to keep Tesla's value down that he might break tradition. This is a meeting I will be watching closely.

 

[Papafox]

Today was a big up day for macros, particularly tech stocks, with the NASDAQ hitting a record high. Apparently tech stocks were buoyed by good job numbers from Friday overpowering concerns of a trade war. Apple was up 0.85%, NVDA up 2.81% and TSLA at 1.69% was positioned in the middle. Apparently the dire predictions of the Needham analysts was disregarded by the market, as was the very positive news of an upcoming gigafactory in Shanghai for Tesla. Looking at the percentage of selling by shorts, this is the first time since late April that TSLA's selling by shorts dropped below 50%. Part of the reason for this low number may be a gradual exit by shorts picking up a bit of steam, or it may be (more likely) something as simple as manipulator shorts seeing no money to be made today with tech stocks heading up so some are sitting out the day. On the suggestion that shorts may have been doing some covering before the Tesla Annual Report on Tuesday afternoon, we saw 136,000 shares trade hands in the opening minute of market trading and over 140,000 shares traded in the final minute of market trading today (times when selling does not impact the SP much), which suggests some covering by shorts.

At 48.7% of TSLA selling today, this is the first day since late April when shorts have sold less than half of TSLA shares. The low volume today suggests that longs were not particularly in a mood to sell, either.

Looking at today's tech chart, you can see that the climb from the lower bollinger band to the upper bollinger band is progressing at a very nice rate, with the upper bb finally climbing again. Want to grab some TSLA at less than 300? Tomorrow might be your last chance if Elon chooses to share good news at the annual meeting.

Conditions:
* Dow up 178 (0.72%)
* NASDAQ up 52 (0.69%)
* TSLA 296.74, up 4.92 (1.69%)
* TSLA volume 4.7M shares
* Oil 64.75, down 1.06 (1.61%)

 

[adiggs]

An ah-hah moment for me thinking about the short % - as you also point out, it was <50% on a low volume day, which means that the absolute number of shares sold short was especially low today. If we take volume and multiply by short %, that gives us short shares sold that day - I don't know exactly what I would do with that, but the absolute value along with the ratio is a pretty typical way to size something.

One implication - even a relatively high short ratio of 60% on low volume could still be low absolute volume, being masked by even lower non-short sell volume (as you point out as well - longs aren't closing their positions, and shorts are opening fewer new positions).

 

[Papafox]

An ah-hah moment for me thinking about the short % - as you also point out, it was <50% on a low volume day, which means that the absolute number of shares sold short was especially low today. If we take volume and multiply by short %, that gives us short shares sold that day - I don't know exactly what I would do with that, but the absolute value along with the ratio is a pretty typical way to size something.

One implication - even a relatively high short ratio of 60% on low volume could still be low absolute volume, being masked by even lower non-short sell volume (as you point out as well - longs aren't closing their positions, and shorts are opening fewer new positions).

What I find interesting is that when shorts are committed to doing 60% of the TSLA selling, they typically do so on low, medium, and high volume trading. When volume doubles, the short percentage of trading doesn't change by more than a few percentage points. Now we're seeing a trend towards lower short percentage of TSLA selling.I believe that when short percentage of selling dips as a trend, that's a pretty good indication that we are seeing covering exceeding selling by shorts, and when we're in a rising percentage of short-selling, I see this trend as shorts increasing their interest.

Rather than assuming that shorts are increasing their holdings when the percentage of selling by shorts is high, I like to consider the numbers. Let's say there's a month with 5M shares traded per day, 20 trading days in the month, and a net change of short interest of 2 million shares throughout the month. 5M shares/day volume = 100M shares/mo traded. If shorts do half the selling that's 50M shares sold by shorts that month, but only about 2M of those shares were sold without corresponding buying (otherwise short interest would change more than 2M), thus only 4% of short selling is increasing positions and the other 96% is manipulations, short-term speculations with covering, and miscellaneous activities by the market. Look at slow selling days as days when the short-selling-market-manipulators are doing less mischief (MMDs, capping, descent into close, etc.) and churning over fewer shares (sell-buy-sell-buy) because they don't expect to make a profit with their manipulations on such days. Why they're doing less is often market related (big up macro day today) sometimes news related (good news for Tesla), or is due to other factors.

We're going to see day to day variations in percentage of selling by shorts, but I like to look at the bigger trends (such as what we're seeing over the past ten days or so). If TSLA shorts increase their percentage of selling over a week or more, I regard this change as shorts becoming emboldened and we can expect some negative effect upon the SP for a while. Conversely, when I see a trend toward lower percentage of selling by shorts (such as now), I see a trend toward more caution by shorts, some net covering, and a likely rise in the SP.

 

[Unpilot]

Hey Papafox I just started reading your blog ...cool stuff thanks for sharing!

 

[cousinHub]

also worth mentioning is the fact that $TSLA is now trading back above the 50day Moving Average, for the 2nd day in a row. Also, this 50day MA will start to flatten as we get rid off the end of March data... technical & swing traders are watching this. Just my 2 cents here.

 

[avoigt]

also worth mentioning is the fact that $TSLA is now trading back above the 50day Moving Average, for the 2nd day in a row. Also, this 50day MA will start to flatten as we get rid off the end of March data... technical & swing traders are watching this. Just my 2 cents here.

... and we are back in the channel we are in since April 2017.... technically the picture has turned to the positive for now. $290 should give us some support.

 

[Papafox]

Today we saw an excellent setup for a "hit and run bear attack" as I detailed here. The short percentage of selling jumping to 59% only confirms the reason for the dip today. Please see short chart below. You are going to see some day to day variations in percentage of selling by shorts simply because the short-selling day traders look for opportunities to make money, and today was such a day.

The annual meeting turned out to be a combination of "nothing big is ever announced at an annual meeting" and 'maybe Elon is going to do something to help the stock price this time." Overall, the content of the annual meeting was quite positive. At about 5:48pm, though, Elon mentioned that Tesla was on track to reach 5,000 M3/wk production rate by end of this month. That comment sent TSLA from about $291.50 to $295 temporarily. A few minutes later, Elon reiterated 3Q and 4Q GAAP+ and FCF. We saw the SP temporarily approach $296 before drifting slightly down. So... Elon served the purposes of the stockholders today by reiterating that Tesla's previously-stated plans are looking good still (and defusing FUD to some extent).

Regarding the Model 3 production line, we received some color on how Tesla is going to achieve 5,000/wk Model 3s because the general assembly line (stuffing the final stuff into the interior of the car) has been split into two lines and a third, more automated GA line has just started operating. Tesla is intelligently modifying the line in order to address the week spots and hit 5,000/wk production by the end of this month so that we can say goodbye to the TSLA $2XX prices forever.

To view a youtube copy of the meeting video, please go to:

The most likely reaction tomorrow will be longs feeling encouraged by the report and shorts feeling that Elon is still P.T. Barnum. The divergence in views will likely exist until Tesla proves that it can produce 5,000 Model 3s/wk and proves that Q3 and Q4 are profitable and cash flow positive. With each bit of evidence that Model 3 is ramping well (4,000/wk is next milestone), some shorts will bail and the upward momentum will continue. The fun is just beginning.

Conditions:
* Dow down 14 (0.06%)
* NASDAQ up 31 (0.41%)
* TSLA 291.13, down 5.61 (1.89%)
* TSLA volume 5.7M shares
* Oil 65.49, down 0.03 (0.05%)
* Percentage of TSLA selling by shorts: 59%

 

[Papafox]

Pardon the typos. "281.50" and "285" should be "291:50" and "295"

Mod: corrected above. --ggr

 

[Papafox]

Today was a big reminder why you don't want to sit on the sidelines when TSLA is potentially ready to move up. Yesterday's Annual Meeting presentation was enough to give other investors the kind of confidence in Tesla that most of us have had for a few weeks now. Bravo! I'm thinking it was both the specifics and the reiterations that made the difference. Back in April, Elon was speaking of about three months to reach 5,0000 M3/wk production rate, which would leave open July as date, but yesterday his statement of before the end of June showed a tightening of the time frame, which is bullish. Also, he went into detail about what the current bottleneck was (general assembly) and how it has been/is being fixed (2nd GA line and now 3rd, faster GA line being added). Such details seemed to do the trick and we saw great price action today. The macros were marching higher throughout the day, which assisted TSLA in its climb.

So, where do we go from here. The bullish answer would be that since TSLA easily destroyed the 310-312 resistance today, TSLA has a clear path to 330-340. The more cautious response would be that TSLA is now well above the upper bollinger band and doesn't stay above typically for more than 2 or 3 days at a time and there's often some profit-taking after such a big up day. The reality likely (but not certainly) lies somewhere between the extremes. Shorts are starting to get margin calls today, so we might see further climbing tomorrow. The upper bb will be climbing now that the middle bb is climbing and the bb range is expanding, due to the large jump in SP today. If you see any kind of panic buying by shorts, the SP could see another good day, but the news yesterday wasn't so strong to cause such a response, and big institutions like to buy within the bollinger band ranges. I would guess a day or two of upper bb climbing and TSLA moderating its climb for the upper bb to catch. If good news (such as word of 4,000 M3/wk rate achieved) comes forth, then we're climbing quickly again, but a more moderate scenario is more likely.

Congratulations on an excellent day, longs!

Conditions:
* Dow up 346 (1.40%)
* NASDAQ up 51 (0.67%)
* TSLA 319.50, up 28.37 (9.74%)
* TSLA volume 18.5M shares
* Oil 64.73, down 0.79 (1.21%)

 

[Papafox]

Looks like the shorts had a rather tough day. Down $1.1 billion in a single day? Wow!

 

[mershaw2001]

Papa fox, do you have any insight into the shares sold short today? I wonder whether it might be higher than usual with such a good short price available. Those people shorting might have decided in the early morning it was attractive at 10 dollars higher than yesterday!