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Papafox's Daily TSLA Trading Charts
- Thread starter Papafox
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- elon is an ass TSLA
Today was an important trading day for Tesla investors as the stock finally had an up day and suggested a bottom to the post Q1 ER dip. Volume was heavy, macros were green and TSLA managed to recover some lost ground today. The day began with a walk-down of the pre-market trading, followed by a short mandatory morning dip. Make no mistake about it, even with reduced percent of selling, we saw evidence of short-seller mischief. The descent from the noon highs appears to have had some influence from shorts hoping to pull TSLA below 240, which is an important number in suggesting distance from the two previous lows during the past 18 months. Between 1:15pm and 2:30pm, TSLA appeared to be in a tug of war between shorts and longs on whether it could recapture 240. Ultimately, the apparent capping by shorts failed and TSLA was able to close a full point above 240 today.
Volume was ferocious at times, with over 113,000 shares trading hands at 10:11am as TSLA approached its first peak. An excess of 100,000 shares traded in the final minute suggest some short covering after today's manipulations. I think a combination of good news (SEC settlement), longs contemplating over the weekend that it was time to get back in, and high volume prevented the shorts from ruining this party.
After-hours trading shows a dip of $1, which is normally a bad sign, but if you look at the trading, that $1 dip took place shortly after close, which could have either been manipulation or some unfinished selling by a small player from market trading. I see no major trend in after hours for the rest of the time, with the exception of one trade where someone looks like they paid 253.96 for 47 shares. In years past, some of my friends and I tried to capture some of these wild after-hours trades. We never could and I think the trade is more some type of anomaly rather than a case of a buyer not setting a suitable limit price on his purchase.
Why such a significant retreat by the shorts today in percentage of selling? First, the SP was rising and that's an environment when shorts who manipulate tend to lose money on the manipulations. Secondly, it's entirely possible that these heavy 9 days of manipulations by shorts were the result of bets being place for the ER (they would have purchased puts) and then the big dog shorts manipulating like hell to insure that their bets paid off. When TSLA wouldn't stay below 235 on Friday, that strength may have suggested to the big dogs that it was time to sell those puts and take their profits. As we saw in the previous dip below 250, sometimes we get a double dip spread over a few trading sessions, so I'll be curious to see if the shorts up their effort after a day or two.
The good news for longs is that if TSLA remains above 240, the suggestion is that we dipped only slightly below the historic trading range before returning to that trading range and now we're at the bottom of the range again with lots or room to rise. A positive day tomorrow would only reinforce this view that we've bottomed out. There are no guarantees, but if the percent of selling by shorts number remains low this stock should be able to climb further. The big question still haunting the stock is demand, and so good InsideEV numbers for April could be a catalyst that gives TSLA further traction. Similarly, FUD about demand, if believable, could have the opposite effect.
Expect shorts to try getting TSLA back into the 230s tomorrow while buying by longs may take the stock into the higher 240s. When volume is high and longs are buying, the shorts lack the horsepower to hold the stock back, such as what we saw today.
The NASDAQ closed up 0.19% today and bolstered TSLA's excellent performance
The drop in percentage of TSLA selling by shorts to 41.5% suggests huge capitulation by the shorts who have manipulated TSLA with extraordinary intensity for the past 9 trading sessions. Interestingly, the chart appears to depict the dreaded fat cat pattern.
Looking at the tech chart, you can see that in early April TSLA was flirting with 300 before the P&D report came out. Today's climb brought TSLA back above the lower bollinger band. Until TSLA climbs above the mid-bb, though, the lower-bb will remain low and tempt shorts to try mischief.
Finally, after a tough week last week, here are two items to enjoy:
VIdeo: Cathie Wood on CNBC
Commentary: Tesla Autonomy Day, the Stock, Short Sellers, and more, by Hamid Shojaee
Conditions:
* Dow up 11 (0.04%)
* NASDAQ up 16 (0.19%)
* TSLA 241.47, up 6.33 (2.69%)
* TSLA volume 16.7M shares
* Oil 63.40
* Percent of TSLA selling tagged to shorts:41.5%
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Antares Nebula
Active Member
@Papafox I think the dip after hours can be attributed to Google earnings drop of 100 points pulling the nasdaq down.
I want to thank you for your always perceptive and well researched comments. I knew about both of the referenced links but thanks to you collecting the two here made it easy to forward them to our wealth manager located on the opposite coast. He falls into the category of an East Coast analyst as more conservative and less into disruptive technology (kudo to Andrea James). He had early confidence in BIIB for example, where, now, Cathy Woods picked a much more profitable gamble in the genomics field.
Best to you and yours.
Although TSLA closed lower today, the strength of the stock was pretty impressive when you consider the environment. In pre-market trading and early market trading, TSLA was up as bulls bought with the thought that the stock has bottomed out and will soon be going higher. Unfortunately, the NASDAQ had a really difficult day, closing down 0.81% with a sizable dip shortly after 11am. TSLA dipped a couple points at 11am but that was it and was ready to climb again. The descent from 1pm to 3pm looks like one of your typical short-seller dips into close attempts, but bulls jumped back in and erased quite a bit of the losses. Selling at more than 30K shares/minute occurred several times today and shorts needed a 46K shares/minute jolt to pull off the final dip of the day.
Although volumebot reports only 43% of selling being tagged to the shorts, evidence suggests otherwise with the serious selling pushes and with 112,000 shares trading hands in the final minute.
News today included:
* An Adam Jonas (Morgan Stanley) hit piece in which Jonas dropped his TSLA price target by $10 to $230. Why would he do this when he had just dropped his target to $240? My guess is that he didn't like seeing Cathie Wood stealing the spotlight on autonomous vehicles so successfully during her interview with CNBC and he had to whack Tesla in order to rain on Cathie's parade.
* A truly excellent interview of self-made billionaire Chamath Palihapitiya on CNBC, (please forward to 27:00) where he defends Tesla, calls out the hedge funds for manipulating the stock price, and suggests investors need to look at the main course (Tesla's vehicles) and not get distracted by the noise (those who don't like Elon Musk). Highly recommended! CNBC's commentator's efforts at Tesla noise were completely shot down in flames by Palihapitiya's defense of Tesla and CNBC decided to delete the Tesla portion of the interview from the video it posted. Fortunately, the vimeo link shows the whole video.
* A Los Angeles Times article written by confirmed Tesla hater Russ Mitchell released this evening which says that revenue in Q1 included nearly $200 million in credits (which could be Fiat-Chrysler money). Mitchell attached a real stinker of a title for maximum negativity. The article may have some influence on trading tomorrow.
Thus, considering the NASDAQ's weakness and the Morgan Stanley downgrade, TSLA hung in there well today.
The NASDAQ lost 0.81% today, and most tech stocks were down for this reason
Here's the incredible chart that tells us volumes about the TSLA's relative strength. According to Dusaniwsky, short interest increased nearly a million shares on Monday, the day that TSLA rose more than $6. A million shares shorted is like 20 instances of 50,000 share selling moments during the day. It couldn't have happened and had TSLA rise so much regardless. My guess is that Dusaniwsky realized that 35 million shares of TSLA are now shorted and he played catch up. Unfortunately, we don't get an accurate idea of when that enormous shorting occurred. Still, with the quantity of shorting that has recently taken place the downward pressure on TSLA has been incredible. The good news? It can't keep coming on this strong for much longer, and when TSLA starts its climb, there's a tremendous number of short positions that are going to start unwinding. Can't wait.
For the technical chart, I include one with October's dip so that you can see that often a dip like this can become messy and shorts aren't willing to abandon the dip yet but bulls are starting to buy. What we're seeing now is a similar type of tug-of war as October.
Conditions:
* Dow up 39 (0.15%)
* NASDAQ down 66 (0.81%)
* TSLA 238.69, down 2.78 (1.15%)
* TSLA volume 9.5M shares
* Oil 63.25
* Percent of TSLA selling tagged to shorts: 43%
Update on Tuesday's post
* The Vimeo link no longer works because NBC leaned on Vimeo to take it down. They REALLY don't want you to see the video.
Here's a link to a quality reproduction of the video with good sound.
Here's a youtube link if you need it for a less attractive picture.
* Tesla announced major reductions to the cost of solar panels and installs today. I've heard $2.50 per watt, which is well below the $3.xx charged by competitors. I suspect demand for powerwalls will also go way up.
* The Vimeo link no longer works because NBC leaned on Vimeo to take it down. They REALLY don't want you to see the video.
Here's a link to a quality reproduction of the video with good sound.
Here's a youtube link if you need it for a less attractive picture.
* Tesla announced major reductions to the cost of solar panels and installs today. I've heard $2.50 per watt, which is well below the $3.xx charged by competitors. I suspect demand for powerwalls will also go way up.
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Today was a moderate volume day with positive macros most of the day and then a strong fade by both NASDAQ and Dow at end of day when the feds revealed no plans to cut interest rates. Positive macros plus a lack of negative news in the morning suggests the deep dip of TSLA after the 10am hour was a bear attack. The presence of icicles throughout the day backs up the bear attack thesis. Selling was unusually high during some minutes, such as the 53K shares sold at 10:25am to support the dip.
Mid-day, InsideEV released their numbers for Tesla's April deliveries in the U.S., and they looked pretty good with over 10K M3s delivered. Models S & X were light, but you would expect so prior to the refresh. If M3 shipments in April to foreign destinations are over 10K as well, then Q2 is looking fairly good so far, providing S & X pick up in May and June with the refresh now available.
What would bring the bear attack today? One thought is that with the InsideEV numbers coming out, the shorts wanted to make sure that TSLA didn't run noticeably higher on those numbers. We were far enough away from the good SEC news now and the shorts probably figured it was time to strike before TSLA ran higher.
Looking at the daily trading, we briefly descended below 232, much like the recent low, and just as with that day, TSLA seemed poise to rise above 235 before close and reclaim the support there. alas, the negative macro performance scuttled the recover to above 235, but if you look at many tech stocks today, they all followed the NASDAQ down in the final hour, but TSLA showed resilience to much further decline. Let's see if TSLA can reclaim 235 tomorrow, macros and news permitting.
Could what we're seeing today be a big investor starting to unload shares? I suspect not, because the trading today included far too many selling spikes and was far too lumpy with lots of icicles. A big institutional investor would be selling in a slower, more steady fashion to avoid the type of price declines we see today.
Although the tagged percent of TSLA selling by shorts today was "only" 43.5%, the trading artifacts suggest a high level of manipulative trading. I would not be surprised if the shorts switch to non-FINRA-reporting sources for their manipulations at such times.
Whisper news: Looks like J.B. Straubel is back at work with Tesla after a 6 month leave.
The NASDAQ was green and stable until the fed meeting, which caused a big dip in the final hour and a close of down 0.57%.
Shorts were tagged with 43.5% of TSLA selling today, but activity suggests a high level of manipulations, nonetheless
Looking at the tech chart, you can see that in both of the two dip prongs so far, the stock recovered considerably by the end of the day and the narrow candle wick remains below. This was also the case in the October dip. In that dip, we saw volume decrease as we neared the beginning of the recovery. When the actual breakout happened, volume then surged.
Conditions:
* Dow down 163 (0.61%)
* NASDAQ down 46 (0.57%)
* TSLA 234.01, down 4.68 (1.96%)
* TSLA volume 10.6M shares
* Oil 63.60
* Percent of TSLA selling tagged to shorts: 43.5%
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Today Tesla announced that it planned to raise $2.3B in capital, a move that Elon said in the Q1 conference call was likely coming.You can see in pre-market trading when the news came out and how positive the response was. Alas, the selling was sufficiently high to bring TSLA below 240 by 10am. There appeared to be capping at 240 for nearly 2 hours and then TSLA made a break for 245, which proved to be a cap on TSLA for the remainder of the day. One could argue that 240 and 245 were just points of resistance with lots of programmed selling, and that's possible, but I think the quick push-down of the price as market opening approached and the steady capping at 2 levels during the day could also have been the work of big dog shorts (hedge funds). One piece of evidence that suggests the capping was done by manipulating shorts instead of longs was the very robust 278,000 shares that traded during the final minute of market time.
Both the bulls and bears are trying to write the story of what happens next. If shorts could push TSLA down below 240 for the close, the story would be "even with cap raise in the offering, TSLA still vulnerable to keep falling." With the cap raise incoming, bulls could instead say, "Yep, this is the bottom of the dip, we're going up from here. Tesla doesn't have a cash problem and with Model Y, Semi, and lots of other good things happening, there's reason for TSLA to climb."
Should TSLA break out of its descending wedge downtrend, the momentum turn would have very positive effects upon the stock as short interest reverses into a decreasing scenario and delta-hedging also aids the stock price in rising.
The NASDAQ and Dow both experienced morning dips, which led the NASDAQ to close down a mere 0.16%. The decrease came between about 10:15am and noon. In contrast Tesla completed its big morning descent about the time the NASDAQ started its descent, so the two dips were unrelated.
I have posted a tech chart that shows both the October bottom and the April/May bottom. The three days after the initial bottom are very similar in both cases and yielded a second bottom. Notice in the October bottom that the breakout was accompanied by high volume. Notice the black candle day (an up day with a close lower than open) that occured immediately after the second dip. In both cases I attribute the black candle to short efforts to artificially push the SP down after it opened quite a bit higher. Today we saw both a price increase and high volume, which hints that a breakout might be possible here. For this reason I picked up a few more DITM leaps today.
Finally, I attach an updated view of the daily chart, showing the strength of TSLA in after-hours trading. Although I usually disregard pre-market trading when guessing what will happen during the day, I've generally found the previous day's after-market trading is a bullish signal if the price keeps rising well above the market close price. The day's not done, so keep an eye on it.
Ultimately, what the market thinks of Tesla in the short to mid-term is going to be about how well it can perform in reaching its Q2 guidance. Profits aren't necessary, only noticeably improved performance. What is importance, however, is delivering enough vehicles so that Tesla gets close to the 90-100 vehicles delivered in Q2 guidance. If it can do this, it debunks the demand cliff myth and sets TSLA up for further climbing.
Conditions:
* Dow down 122 (0.46%)
* NASDAQ down 13 (0.16%)
* TSLA 244.10, up 10.09 (4.31%)
* TSLA volume 18.0M shares
* Oil 61.60
* Percent of TSLA selling tagged to shorts: 42.5%
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Thanks for this. Your thoughts on the timing of the capital raise in relation to the upcoming Uber IPO ? With Uber being valued at over $100 billion, but Tesla arguably now leading the way towards full self driving, are wall street now showing their hand as to which horse they have chosen to back for that market ?
Ben,
To be honest, I haven't given the interactions between TSLA and an Uber IPO much thought. Certainly a high valuation for Uber gives reason to give value to a future Tesla Network, but I believe Wall Street is still skeptical about self-driving competition for Uber at this point and is watching TSLA primarily for its EV production and sales performance alone. OTOH, a high valuation for Uber is a suggestion that serious competition for Uber from Tesla Network is not being seriously considered yet. All of this will change at some future date, but skepticism rules at this time.
Today was day two of good news for TSLA. Not only was the cap raise being bought quickly, the demand was high enough for the $2.3B raise to be expanded to a $2.7B raise. This development is bullish not only because of more money in the bank for TSLA but also as a sign that there's lots of support out there for the company. Volume was unusually high at 23.7M shares traded. Shorts were actually INCREASING their short positions on Thursday and Friday, thus suggesting the run higher would have been even greater without this headwind.
Look at the three examples on the chart to get some idea of how many shares were sold in a few minutes to attempt turning climbs into descents. Further, 492K shares traded in the final minute of market trading and 578K shares traded at 6:10pm in a prearranged sale. That's over a million shares between those two minutes alone! There's lots afoot right now with TSLA trading.
My point is that this is the biggest confrontation we've seen between shorts and longs in quite a long time. Who is going to blink first? That's really an important question. Consider, too, that maybe someone like Goldman or Ballie Gifford is actively buying shares as necessary to counteract the selling by the shorts. The question then becomes who will blink first? Hopefully, with the extension of the buying for the cap raise, the guardian long buyer (if one exists) will hang in there and protect the stock price until the cap raise is completed. Just look at how flat the trading was in after-hours on Friday? It looks like it was done with a straight-edge. Surely someone is trying to manage this stock's price. The counterargument to this theory is that with 23 million shares traded on Friday, there's enough buying by hungry longs to overwhelm the manipulations by the shorts. Overall, I would advise paying close attention to the stock in the coming week to see how the tug-of-war evolves. Also, watch what happens as the volume decreases. Do we see relative influence of manipulations increase? I wish I had a simple answer but I'm really working to wrap my mind around the possibilities.
The NASDAQ was up 1.58% and definitely helped TSLA's climb on Friday. I see correlation between the two charts.
News:
* CNBC story of Tesla cap raise growing from $2.3B to $2.7B and Elon buying $25M in additional TSLA stock
* See below: Automotive analyst thinks FCA will pay Tesla 1.8B Euros in European credit partnership over next few years
Shorts were tagged with 52% of TSLA selling on Friday, indicating the seriousness of their concern with the rising SP.
We have some clarity on the Dusaniwsky graph above. The last day shown on the graph is Wednesday, May 1. Notice that the enormous rise in short interest took place before the big Thursday and Friday stock price increases. Still, if you take Dusaniwsky's word for what's going on, about 1.3 million additional shares were added to short interest on those two days (and yet the stock price rose immensely). Overall, this is a bullish development from the standpoint that we have more than 37 million shares sold short while the stock is near the historical low. The spring is really getting compressed! OTOH, shorts have been throwing resources in an attempt to bring the SP down and gork the cap raise. Just how much more do the shorts have available to throw at TSLA and who is going to blink first, the shorts or the longs? It's exciting and scary at the same time.
As I said before, what we're seeing right now is a side show. The real meat and potatoes will be how many Teslas the company delivers in Q2. In the meantime, we have a very volatile side show.
For the week, TSLA closed at 255.03, up 19.89 from last Friday's 235.14. It's been a good week with an announcement of a cap raise, a successful response to that raise, and a positive Wall Street response to the raise, as well. Have a great weekend.
Conditions:
* Dow up 197 (0.75%)
* NASDAQ up 127 (1.58%)
* TSLA 255.03, up 10.93 (4.48%)
* TSLA volume 23.7M shares
* Oil 61.94
* Percent of TSLA selling tagged to shorts: 52%
Papafox I’m curious if you think the new shares (at $243) coming to the market on Tuesday will have any effects on short term share price at the beginning of the week.
Here’s a cutout from the last 424B5 Tesla filed.
I’m not specifically knowledgeable about how these things work, but I’m guessing this offering will be fully subscribed because at $243 it’s an immediate 5% gain at $255
Here’s a cutout from the last 424B5 Tesla filed.
I’m not specifically knowledgeable about how these things work, but I’m guessing this offering will be fully subscribed because at $243 it’s an immediate 5% gain at $255
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You're reading my mind, @oneday . For the reason you state, I'd be extremely surprised to see the full stock and additional shares not sold if TSLA stays noticeably above 243.
* For this reason, don't be surprised to see shortie try and pull TSLA below 243
* This attempt by shorts to pull TSLA down may be futile, tho, if macros remain healthy and buyers keep picking up TSLA with high volume, feeling that we're in a bounce off the bottom
* Until the shares are actually delivered to the new owners, perhaps we'll have a white knight neutralizing the efforts of the shorts in much the way it was (possibly) done during recent days
* On May 7 or whenever the shares are delivered to the new owners, we may see some shares sold and a dip that day, but the majority of the shares sold are likely going to remain with the buyers for a while. Why? It's too risky an arbitrage to buy TSLA and assume the SP will be higher on the day you can begin trading it. OTOH, I wouldn't put it past Goldman or another big player to buy a hundred thousand shares if they were available and then sell them immediately when they could.
* A lot of retail shorts are distraught by recent events with TSLA. Those individuals will cover and might be the catalyst to get other smaller shorts started in covering. If there's enough covering to keep the rally going, then big dog longs who bought TSLA as part of the cap raise might just hold on for a while and let the stock climb. We only worry about selling by several sources on the same day. Otherwise, it's not much of a threat to the stock price.
Bottom line: The stock price is being determined by typical long buying and selling, extraordinarily high short selling, high volume, possible involvement of a white knight for longs to keep the stock price acceptable until the shares are delivered, and possible arbitrage-type selling on Tuesday by a minority of the stock's purchasers if the stock price remains higher than 243.
Futures are way down for Monday, due to Trump's statement about imposing 25% tariffs on Chinese goods. The tariff will likely be reciprocated by China, which would mean lots of tariffs on Teslas imported into China from the U.S.. Thus, we have double-trouble for tomorrow. On the positive side, word of a $1.8 billion payment coming from Fiat-Chrysler to Tesla in a short number of years is looked at positively. We'll get a chance to see if there's still a white knight protecting the stock price from downward pressure. I hope to see TSLA stay above the 243 price and that could be a really positive indication. Snug up those seatbelts and hang on. The good news is that China likely doesn't want to endure a 25% tariff on its goods for long, and with both countries stating that the deal is close, this move might be the effort needed to get China to sign an agreement that is acceptable to the U.S.Let's hope agreement comes soon.
Today was yet another day that supported my theory that a white knight may be involved in TSLA trading during these days of the cap raise. The theory is that shorts would intervene to disrupt the cap raise (particularly the straight shares portion of it) and that some white knight, either a big TSLA investor or a big dog brokerage house involved in the selling of Tesla's latest offer, has been buying sufficiently to neutralize the efforts of the shorts. Today was a day when the broader markets opened quite a bit lower due to the tariff tweet of the POTUS, but TSLA recovered to the 255ish range while the broader markets never fully recovered. Once TSLA recovered to this price point where selling the Tesla offerings looked attractive, the stock stopped climbing for the most part but the NASDAQ continued to inch higher.
My expectations are that in order to counter the 4 million shares that short interest increased last week, and to keep TSLA at 255ish while the broader markets sank today, some entity had to buy more than 4 million shares of TSLA during this time. If that entity is someone like Ballie Gifford, no problem. If that entity is someone like Goldman, be cautious because some unwinding of that position is possible in the near future. I don't know the reality. There has been very positive news for Tesla within the past week, word of $1.8 billion coming from FCA deal and a successful raise of $2.4-2.7 billion. Is that good news sufficient to counteract the 4 million shares shorted? Maybe, since Thursday, but I doubt so on Monday through Wednesday of last week when we didn't know of the cap raise. I continue to suggest some caution in the short term as we see if there's any unwinding of a position once the cap raise is complete, as early as tomorrow.
Also of note are large transactions: 196K shares during the final minute of market trading and a pre-arranged trade of 576K shares during after-market trading (note that the 6:10pm trade was at 255.34, the same price as market close). The market close number suggests some shorts were covering the daily manipulations at a loss).
Over the period of the next few months, Tesla's progress toward a successful Q2 (delivering 90K vehicles) will be the dominant force in determining the stock price. Again, I would suggest some caution because if a China deal falls through and a tariff war breaks out, such a development will hugely affect Tesla's deliveries to China and will greatly affect the stock price. Conversely, a successful deal will clear the way for easier importation of Teslas into China and less-expensive exportation of parts from China (such as the autopilot board) back to the U.S. I would see optimism for Tesla once the deal gets done. Watch the progression of the deal, because it will affect TSLA in a significant way.
I'm holding off redeploying additional funds into Tesla until I see where the stock price goes once the cap raise has had time to settle. A trade deal between China and the U.S. would overrule that caution, however. Good white knight or evil white knight? I suspect we'll find out this week.
The NASDAQ closed down 0.50%, after starting much lower and then climbing for the remainder of the day.
Batman's second shoulder has now fully formed on the short percentage of trading chart, with today's number showing 47%. A decline from Friday makes sense if the shorts are losing money in their manipulations on days such as today.
The tech chart shows (what to my eye looks like) a 255 pin for a second day. Notice that the mid bollinger band has come all the way down into the 250s. Fortunately, the lower bb is showing some flattening now.
Conditions:
* Dow down 66 (0.25%)
* NASDAQ down 41 (0.50%)
* TSLA 255.34, up 0.31 (0.12%)
* TSLA volume 10.2M shares
* Oil 62.34
* Percent of TSLA selling tagged to shorts: 47%
Zhelko Dimic
Careful bull
All those converts coming online require hedging. Hedging of banks that will sell Tesla hedge between $310 and $600.
So while they'll sell protection to Tesla I expect they will want their position to be delta neutral, and part of that may have been buying in the open market that will then slowly, over time, be converted into some instruments, or just be part of overall brokerage delta balancing. This may be the answer to the buying and SP increase last few days, rather than the white knight theory. It may, not claiming it is.
However, other side of this trade concerns me. Any hedge fund manager that gets his hands on converts may at will short, every time price crosses upwards of $310. At worse, they've juiced their coupon, as they're hedged to any SP increase. At best, they get to cover lower, and then rinse and repeat. I think this is what we saw around $360. So I expect this to be future headwind to the TSLA SP.
However, I don't expect this barrier to withstand strong frontal assault of convincingly good news, like recurring profits, convincingly good near FSD in production etc...
Zhelko,
Thanks for the perspective. If I understand you right, the sellers of the calls used to hedge the converts might short to keep the price from crossing $310 or similar threshold, rather than engaging in traditional delta hedging, which involves buying shares as the stock price rises. It's certainly possible, although I suspect traditional delta hedging by buying shares will be more common simply because its safer. Market makers prefer to make their money off the time value rather than getting involved in speculating or affecting where the stock price is going. Hedge funds might be a different animal. As we both agree, when news is good and big longs are buying, shorting usually cannot stem the increase in stock price. It's a bulldozer that keeps moving forward. Please clarify your position if I missed your point. Thanks.
Thanks for the perspective. If I understand you right, the sellers of the calls used to hedge the converts might short to keep the price from crossing $310 or similar threshold, rather than engaging in traditional delta hedging, which involves buying shares as the stock price rises. It's certainly possible, although I suspect traditional delta hedging by buying shares will be more common simply because its safer. Market makers prefer to make their money off the time value rather than getting involved in speculating or affecting where the stock price is going. Hedge funds might be a different animal. As we both agree, when news is good and big longs are buying, shorting usually cannot stem the increase in stock price. It's a bulldozer that keeps moving forward. Please clarify your position if I missed your point. Thanks.
Today was a second day in a row of macro worries as the Dow dropped 1.79%, NASDAQ dropped 1.96%, and tech stocks I followed dropped between 2.7% and 3.75%. Teslas dip of 3.24% is a pretty typical tech stock dip today. I haven't heard for certain if the cap raise shares were all delivered to new owners yet, but the abandonment of 255 and drift to 250 today is still very consistent with the white knight theory. Further, we saw TSLA approach 245 in mid-afternoon, but it didn't stay there and never dipped below 243, so it is quite possible that some new owners of stock were doing some arbitrage selling today to bail out of the uncertainty of the China negotiations and take a little bit of free money as profit.
Looking at the trading chart, what stands out is generally green trading in the pre-market hours, though the NASDAQ wouldn't really encourage such optimism, and the presence of icicles in the trading, suggesting efforts by shorts to goose the downward trajectory of the stock in the morning and in the low-volume afternoon hours. At some point mid-day it looks like we had a 250 support effort, which could have been the work of a white knight. A significantly high 230K shares traded hands in the final minute, suggesting some covering by shorts who either were day-trade-manipulating or are getting nervous. Additionally, at 4:09pm we saw another pre-arranged trade, this one for 116K shares.
The NASDAQ dipped 1.96% today. It's recover in the final 20 minutes of market trading was reflected by TSLA's trading, too.
Shorts were tagged with selling 45.5% of TSLA shares today, down slightly from yesterday
Looking at the tech chart, you can see the 255 pin is no longer a thing. Fairly soon TSLA will be turned loose to run on whatever news prevails.
The China deal continues to be the 500 lb. gorilla in the room now that emphasis on the cap raise is diminishing. If the amount raised is on the high end of estimates when the final word of the raise comes out, that will be seen as a positive by the market. Otherwise, eyes are on the China negotiations because so much of importance for Tesla is riding on the results. Pay careful attention to news this week if you plan to make any additions or subtractions to your TSLA holdings.
Conditions:
* Dow down 473 (1.79%)
* NASDAQ down 160 (1.96%)
* TSLA 247.06, down 8.28 (3.24%)
* TSLA volume 9.7M shares
* Oil 60.74
* Percent of TSLA selling tagged to shorts: 45.5%
Zhelko Dimic
Careful bull
Hi Papa, that's not quite what I thought.
There are two distinct actors here.
1. Brokerages that have sold Tesla hedging calls - they may have been ones buying stock in the open market last few days, as much as delta hedging calls for at this level. As they sold 5 years options to Tesla for which there is no regular instruments, they have to manage this trade to completion, at this point through buying stock. Of course they can use options, and just manage Greeks, but stock is easier to understand. After all, this service is what they'll charge Tesla cool $100 or $200M.
As per hedging theory and delta of 5 years options, I expect brokerages will need to keep buying stock as price approaches 310 for the reasons of delta (and gamma?) hedging. At $310, delta should be close to 1, and they should be done, having equivalent of the full 100% position.
2. As SP crosses $310 upwards, buyers of bonds come into play - this is second set of actors. They're protected on the upside, so if they choose so, they can short Tesla, or they can sell calls to MM. MMs now owning thousands of calls would need to short stock in order to delta hedge, result is the same, both strategies result into selling pressure. If this selling pressure arrests move upwards and manages to drop SP under $310, bond holders can cover (or buy back calls they sold) at lower price, and lie it wait to rinse and repeat strategy. If they don't manage to arrest the price, this is likely one time barrier that gets overrun and forgotten. But the permanent effect seems as if there are few million shares permanently shorted, so it increases stock float.
Except it doesn't. Well, yes and no. Yes, there are shares shorted, but also there are few millions of shares owned by brokerage as a hedge against calls sold to Tesla. If brokerage carefully manages clients and has similar allocation of calls sold to Tesla and hedge funds owning converts, these two needs can indeed offset each other. Anyhow, overall effect on TSLA when SP is far removed from conversion price of $310 is neutral. When SP is around $310, it creates weird effects.
As Tesla approaches $310 from below, upward moment is driven quicker due to buying of MMs (increasing delta), this buying interest disappears at $310 and above $310 moments turns negative due to short-selling of bond holders. It's like elastic band effect, and then it snaps, once bond holders have full position and can't sell hedged short anymore (310-320-340-360?, don't know).
Now, second scenario, SP coming down towards $310 from higher levels, nothing happens until $310, assuming bond holders have had full position, but below $310, momentum picks up, as MMs start selling their stake (as per delta hedging), which at some point gets arrested as bond holders start covering, reapping profits. Unless they're ideological shorts, but in any case MMs stop selling at around $240, and are out of position.
I hope this makes sense. Word of caution, I understand hedging, but rest of the stuff is my speculation on market participants behaviours, not an intimate knowledge of any single actor strategy.
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