While the NASDAQ opened way up today, TSLA experienced a significant mandatory morning dip that got it heading in the wrong direction. Fortunately, a little after 2pm TSLA managed to climb into the green after steady progress throughout the day. After that, a game of whack-the-mole set in to keep TSLA from doing too much climbing on this options-expiration Friday, and a downward push in the final 15 minutes of trading allowed the shorts to show that TSLA closed down for the second day in a row.
Even though the short-seller alternate uptick rule was in effect today, there are ways to put downward pressure on the stock price, all the same. For example, nearly 235,000 shares traded hands in the first minute of market trading (a minute that has little effect upon the stock price), and so foes of Tesla could easily buy great quantities of the stock for resale minutes later. It's not a profitable enterprise by itself (buy high, sell lower), but if one has a large short holding in TSLA, the overall effect can indeed be positive.
The circuit breaker (alternate uptick rule) has now expired and thus short-sellers will have their full range of tools available on Monday. I have suggested waiting until next week before buying because of this situation. Usually, the shorts can get at least 3 days of mischief out of an ER. Don't be surprised to see an MMD like today's. If investors quickly buy up the dip, however, and TSLA runs to the green i may be time to get more serious about defining a bottom if you have some dry powder and want to get back in. It's also possible that we could see more days of pressure on TSLA, so be careful.
In terms of FUD and media pressure,
this week's Flaming Fudster award goes to Gordon Johnson for his $45 price target on TSLA. Maybe he could better explain why a company that generates over $600 million in free cash flow in a quarter and is growing both deliveries and production can deserve such a low valuation. The board at Papafox's Daily Charts had a tough decision this week because
this CNBC interview about why Tesla's time as a growth stock is now over, by WSJ's Charley Grant, defies logic and begs the question, "Ah, Charley, did you even listen to the conference call?"
The NASDAQ gained 1.11% today, most of it upon opening
Tesla shorts were tagged with 39% of TSLA selling today, a somewhat low number, due to the alternate uptick rule being in effect today
Dusaniwsky's latest graph shows a slight increase in short interest that has followed the 2Q ER.
Looking back at the earnings report, I agree with most TMC members that the future of Tesla is looking solid. That's the glass half full version of the report. The glass half empty version is that with losses greater than expected and a call for break-even performance in Q3, earnings for the year have been significantly diminished from many expectations, and so some downward correction was likely. That said, if Q3 achieves break-even profits or better, then the stock will indeed respond favorably. The big difference between the glass half full and half empty views is that it's easy for a long-term buy and hold stockholder to see good things a couple years down the road from this report, but many investors also trade options or expect quicker returns, and this ER didn't give them a nearby catalyst to hang their hats on. Q4 seems a long ways away to some.
Nonetheless,
@Fact Checking posted
a graph in the main investing thread today that showed Robinhood investors in TSLA are actually more numerous than before the Q2 ER, suggesting that small investors bailing from TSLA was not the reason for the $30+ dip we've experienced since the results came out. Such findings support the contention that liberal manipulations by short-sellers and hedge funds are a reason for much of the dip. Glass half empty longs certainly can be a fair portion of the sellers as well, however.
Looking at the tech chart, you can see that TSLA is now below the mid-bollinger band, and so until the stock price gets above 240ish, the bands will be lowering. Also, taking a look at the chart, you can see the deception that 15 minutes of selling at the end of the day can lend to a chart.
My IRA call moving strategy
Volatility is likely in the coming weeks (months, years, too!), and if you are trading from an IRA or other account where trading doesn't get taxed, here's a technique that I use during such times. With the rewards of TSLA looking a bit more distant than before the ER, I wish to move some 200-strike call options from Jan of 2021 to June of 2021. The way I've done this in the past when there's a clear pattern to the day's or week's trading is to buy or sell 2 of the calls and then wait for sufficient price change to have purchased the later-dated call at no extra charge. For example, if I think the SP is quite likely to fall, I will sell 2 of the Jan 2021 calls. When the stock price has fallen at least 4 dollars (the difference in the price of the calls) I will buy 2 June 2021 calls with the proceeds. Reverse the order by buying the June call first and then selling the Jan call when the stock price is running uphill, but this technique requires a buffer of cash. It's not a hard thing to do when TSLA is running uphill for 7 weeks in a row, but now we're entering choppy waters and so guessing direction will be more difficult at times. The exercise requires work, but you're not only increasing the value of your portfolio when doing this trading, you are also extending the expiration date of your calls and the wearing away of their time value. Use the volatility to your advantage, up or down.
For the week, TSLA closed at 228.04, down 30.14 from last Friday's 258.18. Have a good weekend.
Conditions:
* Dow up 51 (0.19%)
* NASDAQ up 92 (1.11%)
* TSLA 228.04, down 0.78 (0.34%)
* TSLA volume 10.0M shares
* Oil 56.20
* Percent of TSLA selling tagged to shorts: 39%
