Papafox's Daily TSLA Trading Charts

[Sudre]

A few questions if you don't mind me asking:

I am beginning to wonder if a lot of this shorting is institutions like Edward Jones for example trying to make as much as possible on a trade. I know when I used to buy or sell stock directly in a fund I had with them there was at LEAST $100 commission fee each way plus a $5 transaction fee. They could easily borrow the shares at 10am when I bought, hand me the stock, then wait for it to drop and make a fortune off the thousands they trade every day. If the stock didn't move below my buy price any time within the rest of day they could easily cover the small fee off the commission they charged me and still make good money settling at the end of the day.... heck do large institutions even pay a fee or do they just borrow from themselves on a day trade to cover like that?

If Fidelity has a million shares and they loan shorts 500K do they still report they have a million shares or do they have to report those loaned shares as a reduction in their total?

If Fidelity had a bunch of clients purchase shares when the price was around $350 and Fidelity felt there was a good chance the price was going to drop $50 or lower, would they not just sell their shares to their retail buyers (with fees) knowing they could buy them back later at a much lower price?

I am now beginning to see why being an institution is a win win for profits.

 

[Papafox]

A few questions if you don't mind me asking:

I am beginning to wonder if a lot of this shorting is institutions like Edward Jones for example trying to make as much as possible on a trade. I know when I used to buy or sell stock directly in a fund I had with them there was at LEAST $100 commission fee each way plus a $5 transaction fee. They could easily borrow the shares at 10am when I bought, hand me the stock, then wait for it to drop and make a fortune off the thousands they trade every day. If the stock didn't move below my buy price any time within the rest of day they could easily cover the small fee off the commission they charged me and still make good money settling at the end of the day.... heck do large institutions even pay a fee or do they just borrow from themselves on a day trade to cover like that?

If Fidelity has a million shares and they loan shorts 500K do they still report they have a million shares or do they have to report those loaned shares as a reduction in their total?

If Fidelity had a bunch of clients purchase shares when the price was around $350 and Fidelity felt there was a good chance the price was going to drop $50 or lower, would they not just sell their shares to their retail buyers (with fees) knowing they could buy them back later at a much lower price?

I am now beginning to see why being an institution is a win win for profits.

Think of institutional investors as big funds that hold people's retirement savings. They are mostly buy and hold when it comes to stocks. Then you have brokerage houses that lend shares to shorts and do all kinds of financial maneuvers. What's confusing is that you have a company like Fidelity that holds billions in its funds for investors and also operates as a brokerage. The two sides of that business are rather distinct from each other, however.

It's not uncommon for a stock of a company with only 1% held by shorts, Apple, for example, to see the FINRA % of selling by shorts number exceed 50%. AAPL's number was 46% today. Obviously, buying and selling activity by actual short-sellers is a very small percent of that 46%. A huge chunk of it is batching, where the brokerage batches many transactions together and if one of those transactions involves a short, the whole batch is considered "short". Brokerage houses sometimes use shorting as an expedient to keep the house's holdings in balance (not subject it to much risk of the SP going up or down), and of course those transactions get marked as short.

While the explanation above makes the percent of selling by shorts number seem of little value, we've found the number does indeed have value at TSLA, due to the behaviors we see at different percentages. If 45% of selling is tagged to shorts, we typically don't see the obvious manipulations on the daily trading chart such as deep icebergs and strong descents into close. When that number climbs above 55%, though, we typically see the results of manipulations and above 60% the manipulations are typically flagrantly apparent. Just what percentage of that 60% or 45% is actual short-selling is something we don't know. We only know there are certain behaviors observed when % is high.

I know I'm not answering all your questions and it would be hard for me to do so, but perhaps someone else wants to chime in to help.

 

[ggr]

I thought that was a great explanation, thanks!

 

[Papafox]

Let's talk first about the market hours trading. The macros traded higher today because of comments made over the weekend by Trump, saying that talks with China are going so well that he won't be imposing new tariffs on March 1. As with other days with encouraging tariff negotiations news, morning exuberance dissipated as the day went on and this trend was seen today with both the NASDAQ and with TSLA. Nonetheless,Tesla's short-term prospects will be incredibly influenced by a suitable agreement with China because tariffs will greatly affect demand for Tesla's vehicles, especially with tariff-free Model 3s hopefully ready to start rolling off the Shanghai factory line by year's end. Chinese buyers have the option to wait for tariff-free Model 3s, which is why these talks are so critical to Tesla's short term prospects. For this reason, Tesla should have been up much higher than it was today, but I attribute the mild reaction to the news as being the result of some pretty significant manipulations by the shorts (who were tagged with selling 59% of TSLA shares today).

Specifically, it looks like we saw capping in the area of 302, limiting the morning's run up. Then as the NASDAQ started to descend after 11am, you can see that Tesla initially followed but with too much of a decline vs. the NASDAQ, and about 1pm TSLA traders rejected this trajectory, and bid the price back up to about 299, where it remained for the rest of market hours.

The NASDAQ closed up 0.36%, after being up noticeably more in the morning

Shorts were tagged with 59% of TSLA selling today, supporting my theory that quite a bit of attempted manipulations took place today

In after-hours trading, TSLA fell off a cliff not long after 6pm, when the SEC announced that it was asking a judge to hold Elon Musk in contempt for his Feb 19 tweet regarding Tesla's his 2019 estimate of producing "about 500k" cars in 2019. The SEC called the estimate "inaccurate". Musk did make a clarifications to his after-hours tweet and the stock price did not move significantly between the two tweets, so there's evidence that the market did not consider the tweets to be "material". According to the SEC's settlement with Musk, Tesla must have in place a procedure for reviewing all of Elon's material tweets before they are posted. Tweets that are not material to Tesla's stock price are not required to be vetted by another individual prior to launch. Two questions then arise:
1) was this 500k 2019 production tweet "material" to stock trading, and
2) was the 500K 2019 production tweet "inaccurate" as the SEC alleges

This evening after the SEC announcement, Elon tweeted that the Tesla earnings transcript clearly states 350k to 500k production for 2019. I think the SEC jumped on the "inaccurate" claim because of the follow-up tweet that claimed 500k would be the annualized production rate at the end of 2019 and that Tesla would deliver about 400k. The problem with the SEC's claim, though, is that the 500k number Elon gave was production number and then production rate, and these numbers are consistent with statements Tesla has already released. The 400k in Elon's second tweet, on the other hand, was deliveries, which is also likely to be accurate. So, the bottom line is that there's no known inaccuracy in any numbers that Elon tweeted and the tweets themselves were not "material" nor were they "inaccurate". Maybe the realization that Tesla and Elon have a reasonably good defense is part of the reason we've seen recovery in the stock price as the after-hours trading progressed.

I suspect that the judge will rule in a fashion that is consistent with the law and addresses the points of view of both Elon and the SEC. The "how embarassing" statement by Elon will work against him in court because the judge does not want to see continued disrespect for the SEC. For this reason, how the judge rules is somewhat unclear at the moment.

Tomorrow will likely not be a pretty day for the stocks, because shorts will of course try to define the event as being something horrible and will be selling to push the SP down. Longs, on the other hand, will likely sit back and wait to see some recovery before getting back in, so there's room to run down, but once it turns around it could run back up quickly too.

The above tweets came today in after-hours trading

Here's the sequence of February 19 tweets. I include the 4000 Tesla cars loading tweet because it gives context to the tweet that follow above it. Elon was merely stating that when you look at this picture, it's really amazing that in 8 years Tesla will have gone from zero production to half a million yearly rate. I really wonder if the second (clarifying) tweet had not been posted whether a big issue would have come of the tweet. The stock price didn't change much between the two tweets, but we saw a decline in the SP after the second tweet, suggesting that the need for a clarification of an Elon tweet was actually what worried the market and affected the SP.

Conditions:
* Dow up 60 (0.23%)
* NASDAQ up 27 (0.36%)
* TSLA 298.77, up 4.06 (1.38%)
* TSLA volume 6.6M shares
* Oil 55.51

 

[Papafox]

So much of today's trading has centered on the SEC request for a judge to declare Elon Musk in contempt and to seek remedies. The market has been siding with Elon's explanations so far and is discounting the likelihood of the judge reaching a decision that will have a significantly adverse effect upon Tesla.

That said, I see potential complications with the judge's decision (that might be in Tesla's long term best interest), and here's why. I was raised by a father who was a judge, and so I understand the mindset of at least one judge, and from what I learned over years of dealing with other judges, he was fairly representative of members of his profession. The decision that is reached will indeed cite the letter of the law and be consistent with it. The problem is that judges are people who generally seek a fair and positive outcome. A full win for Elon might have the effect of encouraging him to become even more inclined to continue criticizing the SEC, and therein lies a potential problem for Tesla shareholders and Elon himself. It would be in character for many of the judges I have known to make a decision that suggests at least some caution by Elon for future encounters with the SEC. The judge, for instance, could look for evidence of a suitable vetting procedures in Tesla for ensuring that Elon does not tweet potentially material information, and if nothing suitable is in place (in her mind), to ask Tesla to quickly implement one that satisfies her opinion of what is needed. Let's see what she comes up with. I think it is a good thing for Tesla to challenge the SEC's recent request, but that challenge should be done by someone other than Elon, hopefully by the company's attorneys. Elon needs to show he is respectful of the settlement, and it's hard to do so when he is openly combative with the SEC. His "how embarassing" comment on Twitter yesterday would be a warning sign, as far as most judges would see it. The job at Tesla in taking on the SEC really needs to be done by someone other than Elon (the man under the microscope). Let's hope that we see some progress here in changing how Tesla deals with the SEC controversy. This is one place where Elon should not be on the tip of the spear.

 

[Papafox]

I expected to see the type of pre-market stock prices (below 288) during market trading hours today, but the bulls realized that the latest SEC threat is likely to be far less of a problem than the first, and so buyers were taking advantage of these sale prices of TSLA as it sat on the lower bollinger band and near historical turnaround prices for the stock.

That's not to say that the shorts weren't trying to put some blood in the water and see if longs would panic, but no deal. Will 63.5% of today's selling tagged to the shorts, they certainly expended lots of ammo on trying to knock TSLA down on the SEC news, but to no avail. Look at the MMD that took place right after the beginning of market trading. Volume was really heavy, as much as 60k or 70k shares traded per minute, but 8 minutes after opening the MMD was over and TSLA was rising quickly. Shorts tried a secondary pushdown around 10:15am, and it too was dispatched in short order, leading to a rally into the green that included trading approaching but not breaking 302 (a resistance point for several days now). TSLA spent the rest of the day in a game of "whack-the-mole" as bulls took advantage of the sale price and shorts did everything in their power to see TSLA close in the red.

Why was a close in the red so important to the shorts today? The big story about TSLA today was how investors shrugged off the SEC's latest attack, and for TSLA to close in the green the story would have been one of TSLA climbing on the very first full day of trading after the SEC news. Closing in the green might have even led to a news story with a positive spin to it (shudder). Closing in the red kept the story of the shorts intact, sort of. Discerning eyes who understand how much manipulations must have been going on with 63.5% of selling tagged to shorts realize that today was a colossal defeat for the shorts. They lost money on their manipulations today and TSLA looks poised for better things tomorrow.

The NASDAQ closed near even (down 0.07%) today and we saw very little correlation between the macros and TSLA

Holy Moly, just look at that 63.5% of selling tagged to TSLA shorts today.

Today the judge hearing the SEC's complaint, Judge Alison Nathan, informed Elon that he has until March 11 to explain why he should not be held for contempt. This timetable is good news because it suggests the matter will be heard and decided quickly.

In other news, you may remember a while ago when I said that Cramer was a wolf in sheep's clothing when he went on national TV and said that Musk has nothing to worry about the SEC making a decision against him anytime soon. My theory was that he was shaming the SEC into taking action against Musk. Today Cramer showed his true stripes when he came right out and said that Musk should be stripped of his CEO title because of his challenging of the SEC. Sometimes it is nice to have all doubts removed.

To Cramer, I would respond by directing him to Ggr's excellent post, saying "When we become scared to speak truth to those in power, the US has truly lost its way."

Looking at the tech chart, you can see that the lower bollinger band did a truly excellent job defending TSLA's SP against the SEC news and efforts by shorts to push the SP below the lower bb today and keep it there. Wishing I had some dry powder to buy at these great prices, but the shares I recently picked up at 297 and a bit above 300 are looking like good moves so far.

Regarding the ability of a lower bollinger band to repel a descent below it, I look at the slope of the band to give me some clue as to its effectiveness. When the band is falling quickly and has a steep slope (from left to right), I don't see that lower bb as a very good source of support because it is already setting itself up for a quick downhill run to play catch-up with the stock price. On the other hand, look at the lower bb in today's tech chart. The slope is actually upwards (from left to right), suggesting that the lower bb is not in any hurry to start descending and playing catch-up with the stock price.

Unless news changes soon, I see today's pricing as a great entry point for this stock.

Conditions:
* Dow down 34 (0.13%)
* NASDAQ down 5 (0.07%)
* TSLA 297.86, down 0.91 (0.30%)
* TSLA volume 8.6M shares
* Oil 55.94
* Percent of TSLA selling tagged to shorts: 63.5%

 

[Papafox]

Congratulations, longs, TSLA has broken out of the duldrums. The stock was already poised for a run up today as buyers thwarted the best efforts of shorts yesterday to push TSLA down substantially on the SEC announcement news. Resisting such downward pressure while sitting on the lower bollinger band suggested there was little downside and lots of upside to the stock and so up it went today, despite neutral to negative macros. Adding rocket fuel to the equation were the various tweets from Elon telling of an announcement at 2pm Pacific Time on Thursday.

The NASDAQ sank quickly not long after opening but managed to close slightly positive for the day. The good news is that the NASDAQ's morning dip was not harmful to TSLA, but it's steady climb in the afternoon likely did add stability to TSLA's afternoon climb.

Today's drop in % of selling by shorts was a consequence of yesterday's failure to push TSLA down with 63% of selling tagged to shorts. The shorts could not keep losing money trying to contain TSLA at such a level, and when the stock rallied today smarter shorts stayed out of the way of the steamroller. Notice, though, the NASDAQ's dip after 3:15pm brought an attempted dip on steroids, but it was quickly extinguished and the bulls ran back in after the NASDAQ turned upward in the final minutes of market trading.

Looking at the tech chart, you can see the substantial climb after TSLA bounced off the lower bb. TSLA has climbed above the mid bb, though, setting the stock up for dragging the bollinger bands upward once again. The upper bb is at only 321.83 but it has already started to turn upward, which will be helpful if tomorrow's news is substantial and good.

Conditions:
* Dow down 73 (0.28%)
* NASDAQ up 5 (0.07%)
* TSLA 314.74, up 16.88 (5.67%)
* TSLA volume 11.2M shares
* Oil 56.97
* Percent of TSLA selling tagged to shorts: 53.5%

 

[Papafox]

FYI, I sold a few of my trading shares and leaps today in order to have some dry powder for the next time TSLA does something ridiculous. My core position remains intact. I have no idea whether today's announcement will send TSLA high or lower, but history suggests a bit of a meh response in SP when there's been so much of a run up preceding the event. Hoping we go up, though, because I'm heavily invested.

The counterpoint to the typically restrained response of TSLA to announcements is what we're seeing yesterday and near close today. When the shorts lose control of the stock price, when their manipulations are overwhelmed by buying, the shorts start to worry and you're seeing some closing of positions today, I suspect. What we've seen over the past two days is a reminder of what lies in the future once TSLA proves there's no demand issue preventing it from producing substantial and growing profits and cash flow.

 

[JeffreyY]

Papa.... question though. My interpretation of today's events is that no one was expecting low priced M3 this early. So.... I read this as a potential indicator of weak demand driving an early low priced model 3 annoucnement.

I think the $35K M3 alone would not worry me but the notion of closing all the sales locations to jettison the sales staff expense is bothersome and there was a comment that this was the ONLY way to achieve the low priced M3. The only issue is there is no way to listen to the call, so this is just hear-say. If true, this again suggests that low demand required a drop in price, so now the sales org must be reduced / eliminated to achieve the low cost model 3 target price.

These are some of Tesla's best people and evangelists and lots of people talk about their favorable experiences at the showrooms. I think it would have been preferable to suggest that sales and service locations would be consolidated.... that would make more sense. Thoughts?

 

[JeffreyY]

Article on TheVerge

Tesla’s promised $35,000 Model 3 is finally here

That will mean layoffs, Musk said on the call. “There’s no other way for us to achieve the savings required to provide this car and be financially sustainable,” he said. “I wish there was some other way, but unfortunately, it will entail reduction in force on the retail side. There’s no way around it.”

...

But Musk admitted that demand is a question. “I mean, I don’t know what the demand is. We’ll see,” Musk said. He estimated that there could be demand for 500,000 Model 3s in the US

 

[Papafox]

Article on TheVerge

Tesla’s promised $35,000 Model 3 is finally here

That will mean layoffs, Musk said on the call. “There’s no other way for us to achieve the savings required to provide this car and be financially sustainable,” he said. “I wish there was some other way, but unfortunately, it will entail reduction in force on the retail side. There’s no way around it.”

...

But Musk admitted that demand is a question. “I mean, I don’t know what the demand is. We’ll see,” Musk said. He estimated that there could be demand for 500,000 Model 3s in the US

Let me address in today's post.

 

[JeffreyY]

Thanks as always!

 

[Papafox]

First, consider the trading prior to today's announcement. The reason the trading bars at the chart's bottom look so small is because they were dwarfed by trading in the final minute of the day, 230,000 shares. Wow. Although we've seen short interest very slowly creeping up the past couple of days, I suspect we saw a good amount of covering going into the close. It's really nice to see two days in a row when the shorts have no control over the stock price.

The NASDAQ was down in the morning and afternoon, closing down 0.22%

Selling by TSLA shorts was a still robust 53% today. Once TSLA started rising into the close there was no way the shorts could slow it down, however.

Now for the big story: The $35,000 M3 will start shipping right away. The bears will claim "demand issues" and they're partially correct. I think Tesla would have held off on the introduction of the SR if North America demand looked strong enough to pull in all March production. Demand in Europe and China are apparently still strong for the bigger battery variants of M3, but Tesla needed good demand in North America for March and it likely looked insufficient for the current production rate. Thus, Tesla made the big decision to sell online only and eliminate the substantial cost of most stores and sales staff. Apparently about 80% of Teslas are being sold online already.

How will the closing of stores affect demand? For M3 and MY, it won't be a problem. The vehicles will be so much in demand that stores will simply be unnecessary. I'm thinking S and X sales may be affected, however, because high end buyers typically want the test drives and the human involvement. We'll see for S and X, but for the next couple of years Tesla will sell and the Model 3s and Ys it can with these attractive prices. I have a Model 3 as my daily driver right now and it's a Porsche/Ferrari with better economy than a smart car. At $35,000, these things will sell. Elon has already said that the SR+ (which costs 2500 more) loaded with autopilot (for another 3K) is the way to go. Add another $1000 for wheels or paint and you're looking at a $38,500 vehicle that Tesla thinks they can make a decent profit selling.

This step of slashing sales costs was necessary because production in Fremont needs to keep increasing in order to bring the economies of scale needed for a profitable M3 SR to be included in the mix. Slowing production in March or just shipping to Europe and China and foregoing March revenue just was not going to work. Now the factory can keep cranking and lowering the price of Model 3 to hit the magic numbers.

My view is that this bold move by Tesla to introduce SR M3 and slash sales costs is going to work. Demand is no longer an issue because the only real competition that Tesla had for the longer-range, more expensive M3s was the SR. Now that the basic SR is available, watch the orders flow in. Elon says Q1 will not be profitable because of all the one-time charges for the coming changes, but Q2 will likely be profitable. Everybody is going to be watching the margins. Keep in mind that margins are only part of the story, however. S, G, and A expenses are not included in margins and they're going to be falling considerably, so profits are possible with lower margins. Also, with falling sales expenses, adding Model Y makes Tesla extremely profitable.

As an investor, I would say watch out for volatility during the next three or four months, but should a profit be turned in Q2 and Tesla is added to the S&P 500, it's off to the races.Things only get better from there.

For tomorrow, shorts will likely try their usual tricks by trying for a dip to define today's announcement as a negative. TSLA held up well in after-hours trading today, so that strength could help tomorrow as well. For now, everyone is trying to wrap their minds around this huge changes. Look for analyst adjustments to price targets as a clue to how the stock may trade in the short run.

This is THE big test for Tesla. Once it can profitably deliver M3 SR, there's no stopping it and the SP will respond accordingly. In the meantime, snug up that seatbelt because turbulence is inevitable.

Conditions:
* Dow down 69 (0.27%)
* NASDAQ down 22 (0.29%)
* TSLA 319.88, up 5.14 (1.63%)
* TSLA volume 10.5M shares
* Oil 57.40
* Percent of TSLA selling tagged to the shorts: 53%

 

[JeffreyY]

Thanks as always for your thoughts. I agree with you overall on demand and proobably should’ve clarified a few things.

First, I should have clarified my perception on demand as a short term issue (agree with you)

Second, that it seems to be an abrupt move / non sequiter / reaction since previously Elon stated that Tesla would be profitable for all quarters going forward

Third, this has probably been in Elon’s mind for a while given the push to try before you buy, fast delivery etc but a smoother, less abrupt transition would make it seem more planned / less reactive

In sum, my long term confidence is not swayed, but am expecting short term volatility and was wondering which direction you thought it would go over the next few days

Interestingly, aside from the WSJ, most media articles are positive ok $35K M3 availability. Interested to see analyst reactions as well.

On the other hand, kudos to Elon for as usual making the hard choices this time ahead of Shanghai Giga and the ramp in volume later this year. Also, if I were Honda or Toyota, I’d be fearful for my Accord / Camry etc sales since the M3 is now clearly in that price bracket

 

[Sudre]

Second, that it seems to be an abrupt move / non sequiter / reaction since previously Elon stated that Tesla would be profitable for all quarters going forward

I really wish non-bears would stop making this error. Elon NEVER said Tesla would 100% be profitable for all quarter going forward. He very clearly stipulated that 1st quarter would be questionable. It was VERY clear to anyone with any common sense that Q1 was iffy.

Q2 will be a disappointment if it’s not profitable.

 

[Papafox]

I really wish non-bears would stop making this error. Elon NEVER said Tesla would 100% be profitable for all quarter going forward. He very clearly stipulated that 1st quarter would be questionable. It was VERY clear to anyone with any common sense that Q1 was iffy.

Q2 will be a disappointment if it’s not profitable.

Fortunately, many analysts are reminding us that Q1 was already guided as barely profitable, if at all, so there's not a big change in expectations for Q1. Elon did make a statement not long ago that he suspected Q1 would indeed be profitable, but that was before this big change and associated one-time costs. I agree that Q2 will be a pivotal quarter for Tesla. If Tesla can show it will be profitable with this mix of vehicles it'll snare an S&P 500 inclusion as well as demonstrate the new model of low prices but little help from stores is a workable plan.

 

[Antares Nebula]

@Papafox thanks for your awesome daily updates! I read them every single day.

@defc0n Maybe. We also had a death cross in the last few days. But It had a golden cross back in Nov/Dec., and it went down after that. Tesla responds more to pivot points than moving averages and their derivatives.

Contrarily, you can see the inverse head and shoulders and double bottom on that chart. Look at the latest hammer on the monthly chart as well. Finally, the latest ride down from 370/380 looks like a bull flag to me. Regardless of the bullish or bearish indicators, all TA should of course be taken with a grain of salt. Let's see what happens!

 

[Papafox]

I think when we look back on Friday's trading we'll see it for what it really was: one of the classic manipulation moments in Tesla's history. The overall message of the announcement was quite positive: Tesla has found a way to profitably offer the $35,000 Model 3 ahead of schedule. Here's what transpired.

On Thursday in after-hours trading following Tesla's announcement, shares dipped from a trading level of about $320 down to about 308ish. A few days earlier, TSLA had traded in the mid-290s after recovering a bit from the SEC news. When Elon tweeted an important announcement was coming, the price shot up to that $320ish price we saw before the actual announcement. Unless the announcement was clearly beneficial to the SP, there's usually a sell the news reaction, and since the news was controversial, the sell-the-news reaction brought the SP down to 308ish in Thursday after-hours trading, a fairly reasonable dip while investors scurried to figure out if the news was really bad or good. That was the approximate price Friday morning in pre-market trading, as well. Typically, big investors will wait a few minutes on controversial news to see which way the stock runs, but they didn't get the chance, because at 9:31am 137K shares sold and the next minute, 9:32am, saw 149K shares sold. Thus someone was establishing that the news was something to sell big on. My strong suspicion is that someone was a collection of short-sellers who sought to prey upon the uncertainty of the announcement and get a big dip going. After all, there was some uncertainty in the air and it was up to them to define it as a negative.

The big short-selling of those first two minutes was indeed a profitable exercise, if that's what it was. The stock was still trading above $303 at that moment and bottomed out near 292 in early afternoon. Those who sold during those first couple of minutes could cover their shorting at a handy profit and then jump back into the game.

The granddaddy of selling took place at 10:13am, when 157K shares were sold in a minute's time. Volume was nowhere near this high and then WHAM! 157,000 shares traded, followed by nothing even close in volume. I'm sure bots contributed, but the catalyst had to be over 100K shares sold to get that kind of reaction. No big institution sells like this. The only people selling in chunks that size are shorts, trying to sink the SP further. Anyway, buyers were picking up shares under 295. This was the price right before Elon's tweet of a coming announcement, and any lower than mid 290s was a sale on a stock that for all practical purposes just had good news released. The low 290s were also protected by the lower bollinger band. Finally, at 4:00pm, 156,000 shares traded hands during the minute when covering one's short-selling that day does not push the stock price higher.

After all the day's trading gyrations, we learned that Tesla matter-of-factly paid off their note in cash. Reuters: Tesla pays off $920M debt with cash

* Fact Checking's transcript of Thursday's call with media lets you see what Elon shared with the media.

The NASDAQ closed up 0.83%, with a solid climb in the afternoon

Shorts were tagged with 66% of TSLA selling on Friday, indicating manipulations are at extreme levels. Short percentage of selling at 66% is near highest recorded ever for TSLA.

Want to see why TSLA didn't go much lower on Friday, despite the heavy pushing by short-selling? Check out the lower bollinger band and how well it supported the price (for the third time in 2 weeks- see the tech chart). Unfortunately, the 50 day moving average has descended below the 200 day, making some technical investors unhappy and (more importantly) the lower bb has started slanting down a bit (seen from left to right), which somewhat weakens its strength as support, so let's hope for a bounce on Monday rather than continued pressure by shorts, which would increase the slope and make it less supportive.

On Friday I started replacing some of my trading shares sold before close on Thursday. The day's super high percent of selling by shorts data (66%), suggests that Friday's significant dip was only possible through massive short-seller manipulations. That conclusion plus the stock price remaining above the lower bollinger band gives me reason to believe that we are at or near the bottom of this dip. Effective FUD or bad macros could give the dip more energy, but otherwise the upside looks overwhelmingly greater than the downside at this point.I'm being careful buying back until I either see what FUD the media throws at Tesla on Monday or I see TSLA rising as investors recognizing the value of the stock at this moment.

I'm writing a followup post now regarding the strength of this announcement vs. Friday's reaction.

TSLA this week closed at 294.79, up 8 cents from last week's 294.71. Have a great weekend.

Conditions:
* Dow up 110 (0.43%)
* NASDAQ up 63 (0.83%)
* TSLA 294.79, down 25.09 (7.84%)
* TSLA volume 22.8M shares
* Oil 55.79
* Percent of TSLA selling tagged to short-sellers: 66%

 

[Papafox]

The big question continues to be the relative weight of Tesla's news on the stock price. The news was mostly positive but contained two potentially negative elements. Let's look at the negative, as a bear would see it, and then in a more realistic light.

* Bear view: Tesla's introduction of the $35,000 M3 indicates softness of demand
Reality: There's some truth that in North America Tesla probably couldn't have finished Q1 at full production rate with eager buyers lined up for the LR and MR M3s. The main reasons: a moving forward of organic demand in NA to Q4 18 due to tax credit expirations, the slowest sales quarter of the year, and two quarters in which all Model 3 shipments went exclusively to North America. The solution is to add the SR to the lineup but price the other M3s attractively so that ordering a bargain-priced SR is not the obvious choice, even for those who can afford more. Now the pricing has been rationalized so that each step up is palatable for someone who can afford it. Adding the SR removes any reason to wait. If this is the vehicle that a buyer wants, then that buyer should order before the 50% tax credit disappears, and then before the 25% tax credit disappears. There's no advantage to waiting any longer. Once more Tesla Model 3s get in the hands of buyers who live in places that are not already popular with the Tesla crowd, the inevitable selling by word of mouth begins and Tesla's whole lineup benefits from the geographic expansion of the Teslaverse. Tesla Model 3 SRs are the seeds that will now bring this company to maturity. Yes, there was a weakness in demand for higher priced M3s to be delivered in March, but there is no evidence of weakness in demand for Model 3 once the full range of Model 3s is available, and that time has arrived.

* Bear view: Closing of Tesla stores means that Tesla has abandoned its long-standing marketing approach and has embarked upon unknown methods of selling its vehicles.
Reality: The stores were essential to get Tesla into the minds of consumers when Tesla was such a new brand. The brand has matured now, however, and stores are not nearly as important, especially with 80% of buyers ordering their vehicles online. Money saved from staffing stores with salesmen can better be spent getting the $35,000 Model 3 profitably in the hands of new owners. Also, the reduction in stores is not a binary decision. Some stores will become galleries. Sales commissions need not be paid in the future to sell Teslas, but if demand ever needs a boost, the decision to add back some physical showcases remains viable. For the foreseeable future, however, enthusiasm for Model 3 and soon for Model Y should keep the deliveries flowing.

Reality check:
As investors, we need to keep an eye on how well the plan is working. Presently, a Model 3 of any type except for SR can be built and made available within 2 weeks, according to Tesla's design studio. That's not much of a cushion. The base SR has a 2-4 week wait at present and once it moves to 4-6 weeks we'll know that March has been taken care of. Within a week or so we need to see those numbers increasing to show that the announcement has indeed translated into substantial ordering. I suspect we'll see a good rush in June as U.S. buyers take delivery in order to get the 50% tax credit before it expires July 1. April and May should have been taken up primarily with European and Chinese deliveries. Thus, it's Q1 March that is at stake and I think the M3 SR will come through and juice the sales as needed.

As for gross margins, watch for continued progress in ramping up production towards 7K/week with M3. Quantity leads to cost efficiencies plus it also indicates that the factory is running smoothly. I suspect Q1 ER and CC will be our first chance to get a feel for SR profitability, but listen for stories about how well the new Grohmann line is working at the Gigafactory and similar stories. For all these reasons, the stock price may continue to be depressed until there's more evidence that the plan is working. Expect bear attacks and FUD during this time while we wait for confirmation of the plan's success.

The good news is that Tesla has taken the big leap. Once the company proves that it is profitable with these price points, there's little room for a further extension of the bear narrative.

 

[jbih]

What do you think of Ihors post:

Ihor Dusaniwsky on Twitter

#Tesla Down 7% on Long Selling Not Short Selling. $TSLA short interest is $8.22 billion; 25.69 million shares shorted; 20.30% of its float; and stock borrow costs are 0.30% fee. Read my research note on: https://shortsight.com/s3-analytics-tesla-down-7-on-long-selling-not-short-selling/ …

And a longer conversion with roughly the same content. It starts with:

Carmine DI VIRGILIO on Twitter

* Carmine: @ihors3 Is $TSLA plummetting due to shorts opening or long closing positions? Can you figure out whether the shorts are increasing?
* Ihor: long shareholders selling is the overwhelming reason behind today's price dump.
* Jolly: How csn you tell its not the short sellers?
* Ihor: The amount of net short activity I saw on the street relative to the total trading volume was too small on its own to move the market so much ... So it had to be long shareholder selling that drove the stock price down so much.