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Wow, what a week. On Friday, TSLA was already pushing 370 in pre-market and exceeded 378 at its 10:05am high. Causes for this optimism included:
* Tesla's decision to pay half cash, half shares for the March notes, giving Tesla an extra half billion dollars or so in available capital
* TSLA closing above 360 on Thursday, strongly suggesting that TSLA will be well above 360 during Feb days for determining how March notes will be handled
* Reports of strong Tesla production. Tweeter Vicky Salvador, who has worked in the paint shop in Fremont is talking about new records being broken. Since paint does S,X,&3, 1300 vehicles in 24 hours is a huge increase in production (think 1000 M3/day plus 300 S&X day). Let's see how soon those numbers can become long-term sustainable
* Jeffreys upgraded TSLA from 360 and hold to 450 and buy
* TSLA has shown incredible resilience during a week with the Dow down more than 1000 pts and NASDAQ doing similarly bad
* Some short-seller margin calls are almost certainly generating covering
* TSLA is being perceived by some as a safe-harbor stock during the downturn and is drawing investors for this reason
Alas, TSLA set itself up for short-seller manipulations on Friday because of the following weaknesses:
* NASDAQ continued to dive deeply throughout the day
* High of day was reached shortly after 10:00am, leaving lots of time for a dip
* Upper bollinger band was only approximately at 366 and TSLA has shown strong tendency to sink below the upper bb before closings
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With the exception of the final hour of market trading, TSLA was on a downward trajectory throughout Friday and closed down more than 3%. Tech stocks I follow closed down between 3.5% and 6.75% today.
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Shorts did 56.16% of TSLA selling on Friday, up a bit from Thursday because manipulating looked like easy money to shorts with TSLA so high so early in day, well above upper bollinger band, and macros crashing. Once the easy money situations disappear, I would expect to see percent of selling number decrease further as shorts become even more disheartened.
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Max pain was at 357.50 today
Here's how I think Friday's trading evolved. TSLA couldn't hold 378 for several reasons and slipped to 373ish by 1:00pm. I've seen lots of plays that I attribute to the shorts begin right on the hour and this one fit the pattern. TSLA started down even though the NASDAQ was actually climbing a bit until about 1:10pm. Once the NASDAQ started dipping again and the shorts were selling during the slow afternoon hours a smooth transition to a descent began. Shorts really wanted to continue the descent into the red and you can see that volume picked up as TSLA approached the red and we saw a game of whack-the-mole near the red/green line of approximately 363 for most of the rest of the afternoon. With about 20 minutes of market trading left, TSLA dipped into the red and then accelerated the dip. I think this dip was a combination of shorts pushing down like they've done most the week near closing and market makers pushing down to get TSLA as close to the 357.50 max pain price as possible. They came within 50 cents of that target. Over 300,000 shares traded in the final minute of the day, which suggests lots of covering by the day-trading short manipulators.
TSLA outperformed the broader markets again today by a wide margin, and one should not be too disappointed by Friday's trading because the deck was truly stacked against TSLA for holding that 378 price. As soon as the macros moderate, TSLA looks ready to regain this lost ground. While TSLA regularly repeats the pattern of exploring well above the upper bollinger band and closing below it, today's strong trading suggests that pattern itself may go by the wayside. Hard to tell. In the meantime, I'm expecting to see the upper bb keep climbing and giving TSLA more room to run. Whether we set a new All Time High before or after the end of 2018, I think it's going to happen because all of the efforts of Tesla over the years are finally coming together. We will see strong Q4 production and deliveries, we will see good Q4 profit and cash flow numbers, and I think we'll see impressive guidance for 2019 in the Q4 report.
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Dusaniwsky's latest report shows that short interest remains at around $10 billion, even though lots of covering has taken place in recent weeks. The implication is that fewer and fewer shorts are on the hook for covering that $10 billion tab. It's going to turn very ugly for the remaining shorts at some point, and this reality suggest the possibility of a mini-squeeze as shorts scramble to get out on a particularly high-trading day for TSLA.
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I've heard reports of some brokerage houses not making shares of TSLA available to shorts lately, even though they surely have the shares available, as Dusaniwsky alludes to. One possibility? Perhaps the houses see the possibility of a squeeze being set up and wish to minimize their exposure to shorts who might not be able to extract themselves whole, perhaps shorts whose long investments have taken a recent beating. Keep an eye on the availability of shares to short next week. All this talk must only make shorts more nervous, which only increases the possibility of a substantial buying panic taking place. No doubt macros will play a role in whether we ever see some type of squeeze.
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Looking at the technical chart, you can see about $8 of headroom between the stock price and the upper bollinger band for Monday's open. Normally, a descent such as Friday's would signal further descent of a stock, but with TSLA so much stronger than the macros, alternate interpretations are available.
For the week, TSLA closed at 357.96, up 7.48 from last Friday's 350.48. When you consider the DOW was down 1000 pts for the week and the NASDAQ fared no better, it was a remarkable performance by TSLA. Have a good weekend. Exciting days lay ahead.
Conditions:
* Dow down 559 (2.24%)
* NASDAQ down 219 (3.05%)
* TSLA 357.96, down 5.10 (1.40%)
* TSLA volume 11.5M shares
* Oil 52.61, up 1.12 (2.18%)
* Percent of TSLA selling by shorts: 56.16%