Papafox's Daily TSLA Trading Charts

[Papafox]

We've just completed a week of profit-taking and consolidation: 3 days of profit-taking and 2 of consolidation. Volume dropped from nearly 19 million on Monday to less than 6.5 million on Thursday and Friday. Dusaniwsky's charts suggests lots of short-seller covering this past week. I continue to believe that once TSLA restarts its climb, the long buyers will return and the shorts will continue to cover.

Looking at the daily chart, you can see positive trading in pre-market, which would be expected on a day with macros doing well, but a Mandatory Morning Dip and one additional push-down mid-day told traders that they'd be best off with another stock on this high-flying macro day. Nonetheless, TSLA showed a nice recovery going into close. If hedge funds were maneuvering for a close below 310, they failed. The rise into close on a Friday makes sense because every Monday for the past 5 weeks TSLA has either enjoyed a Monday morning buyer's exuberance moment at open or has seen a nice run higher during the day.

News at week's end included this Business Insider story that Chrysler-Fiat would consider using some Tesla technology in upcoming EVs.

About 2pm on Friday, Russ Mitchell of the L.A. Times let loose this tired piece of recycled FUD, claiming the NHTSA was investigating Tesla regarding battery fires, apparently hoping to drive the stock price down in the final hours of options close Friday. Alas, the NHTSA contacted Mitchell and said his headline was incorrect, that the NHTSA was merely looking into a "defect petition". Rather than correct the erroneous headline, though, Mitchell just changed the wording from "investigation" to "probe". For his willingness to willfully deceive the public with intention of harming Tesla, Russ Mitchell wins this week's FUDster of the week award and his name is now nominated for the coveted FUDster of the decade award. Fortunately, the market was wise to Mitchell's antics and shrugged off the story.

The macros were strong on Friday with the NASDAQ closing up 1.13%

Here's portions of the Friday opricot.com max pain chart. Notice that despite lots of activity this week, 310-strike puts expired worthless on Friday, but 310 and 312.50 calls closed in the money, which likely cost the hedge funds some money

TSLA shorts were tagged with 36.5% of selling on Friday, an uptick that is consistent with increased manipulations on option-close Friday

Looking at the tech chart, there's much to like here. The blue line is now showing the 50 day moving average, and you can see that it will be crossing the 200 DMA this coming week and unleashing a golden cross to stir the interests of technical traders. The upper bollinger band now stands at 338.16, clearing the way for some serious price appreciation once the run-up begins. Finally, the profit-taking dip has now turning into a mostly-horizontal consolidation.

What catalyst will be enough to get TSLA climbing again? It's possible that something as otherwise insignificant as the typical Monday morning buyers enthusiasm on opening could be enough. We'll see. The counter to this exuberant run higher on open is, of course, a push-down into a Mandatory Morning DIp, but if that pushdown is unsuccessful it clears the way for further price appreciation.

We'll see if InsideEVs.com publishes Tesla October delivery numbers this coming week. They may be lower than some expect, however, because Tesla has been shipping overseas at a considerably higher rate than we've seen in any previous quarter. Demand in the U.S. is still there, however, as evidenced by the 5-8 week wait times for M3 SR+ and LR and 6-8 weeks for M3 Performance vehicles. My sense is that Tesla has enough demand so that they can move U.S. deliveries to December while sending cars overseas and then be certain of having enough U.S. deliveries to absorb all production as the quarter nears its end.

This past week of profit-taking and consolidation left TSLA closing at 313.31, down 14.82 from last Friday's 328.13. Please enjoy the rest of your weekend.

P.S. The NASDAQ is not in the habit of sending engraved invitations when your favorite stock is about to run higher. It's your decision to join the party when evidence looks promising.

Conditions:
* Dow up 301 (1.11%)
* NASDAQ up 94 (1.13%)
* TSLA 313.31, down 1.61 (0.51%)
* TSLA volume 6.4M shares
* Oil 56.20
* Percent of TSLA selling tagged to shorts: 35.5%

 

[TrendTrader007]

The crossover of 13/34 exponential moving average weekly is highly significant and portends a rally is stronger than November 2016 and somewhere between the rally of November 2016 and rally of April 2013 ;this reinforces my belief that the current really is in the very incipient stages with lots of room to go probably in the neighborhood of another 5 to 6 months before a major pullback

Accordingly I dutifully executed purchase of $tsla june 2020 $690 call options last Thursday

 

[elasalle]

Reminder:
Be Greedy when others are Fearful. Be Fearful when others are Greedy ... ~ Cheers

 

[SageBrush]

* Percent of TSLA selling tagged to shorts: 35.5%

I apologize if this has been explained before, how is this percent figured out ?

 

[guidooo]

I apologize if this has been explained before, how is this percent figured out ?

My mental model of this number is build upon posts: #1329 (page 67), #1438 (page 72) and #1725 (page 87) of this thread.

 

[mblakele]

I apologize if this has been explained before, how is this percent figured out ?

Hmm, I thought someone else answered this question earlier today. But here's the link: Papafox's Daily TSLA Trading Charts

Here's the shortish answer. When FINRA data says 61% of selling was by shorts, it means that 61% of selling transactions were given a tag of "short" on the ticker. The problem is that brokerage houses often group several sales into one entry and if any of them are considered short sales, the whole batch is tagged short. So... there is always some exaggeration of the number. We don't know the real percentage, but we do know when the stated percent of selling by shorts is in the mid 50s or above, there appears to be lots of manipulations by shorts, such as mandatory morning dip, capping, descent into close, etc. These manipulations can occur on days when there is zero net shorting vs. covering by shorts because on the one hand, some shorts are covering while others are opening new positions, but more likely the majority of short selling on such days involves selling in big quantities at critical times, covering somewhat slower to close that short position, and then repeating the process at critical times so that the net effect is one of pushing the stock price downward.

It might be useful if @Papafox included this link in his daily posts, or a boilerplate copy of the explanation.

 

[SpiceWare]

Hmm, I thought someone else answered this question earlier today.

Yes, that was me - quite a few people liked the post in fact. I'd posted a link to my post from last year where I'd suggested Papafox modify his template as it can be hard to track down info in a topic with over 2000 replies.

Basically a copy/paste of the following template:

Conditions:
* Dow updown xx (xx%)
* NASDAQ updown xx (xx%)
* TSLA xx, updown xx (xx%)
* TSLA volume xxM shares
* Oil xx, updown xx (xx%)
* [url=https://teslamotorsclub.com/tmc/posts/3227124/]Percent of TSLA selling by shorts[/url]: xx%

results in a clickable link that answers the regularly asked question:

Conditions:
* Dow updown xx (xx%)
* NASDAQ updown xx (xx%)
* TSLA xx, updown xx (xx%)
* TSLA volume xxM shares
* Oil xx, updown xx (xx%)
* Percent of TSLA selling by shorts: xx%

 

[Papafox]

Today, TSLA finally received the catalyst that pulled it out of consolidation mode, but it was one that few expected. In pre-market trading, TSLA was in the green as you would expect on a Monday morning with positive macros. In order to avoid a market opening shot of adrenaline from exuberant Monday morning buyers, the hedge funds, backed by L.A. Times, NBC, ABC, and others running with the recycled FUD story about NHTSA "investigating" Tesla battery fires, initiated a Mandatory Morning Dip. When the first segment was rejected, a second attempt at the dip occurred, with an apparent goal of driving TSLA below 310 and unleashing the stop-loss triggers set at that amount. Alas, when TSLA approached 310, it bounced hard. That hard bounce suggested that 310 was a very solid limit to the low side and it was safe to buy, which is what happened next as TSLA quickly ascended through 320.

The day was not without apparent manipulations. After about 2:40pm (see NASDAQ chart below), the NASDAQ started a dip and hedge funds apparently started their selling to engineer a dip on steroids for TSLA. On a percentage basis, the TSLA dip was significantly deeper than the NASDAQ dip. At 3:18pm we saw a mighty 102K shares sold in a single minute that pushed TSLA lower, and although the NASDAQ recovered a bit from 3:30pm to 4:00pm, TSLA saw a last minute dip to remain below 318 into the close, thus completing a sticky dip on steroids maneuver.

Nonetheless, the damage to the shorts has been done. The five days in a row of negative results has been broken convincingly. Buyers can now pick up TSLA without catching falling knives, and the price increases today will encourage other shorts to cover. One Brazilian hedge fund mentioned today it was abandoning it's TSLA short position after the 3Q ER showed improving cost efficiencies that defied their thesis for shorting. Notice that this decision came a few days after the release of the 10-Q.

In news today, the blue plaid Tesla Model S set an unofficial lap time of 7:13 today on Germany's "ring", thereby beating the Taycan's time by 30 seconds on its home court. Although the plaid version of the Model S will not be available until later next year, the positive publicity from the ring performance will likely spur some short-term Model S purchases and brings back some of the attention stolen recently by Model 3 and Model Y.

The NASDAQ opened high and ran consistently strong throughout the day to close up 0.56

TSLA shorts were tagged with 41% of the selling today

@SageBrush , the number above is the percentage of ticker transactions from FINRA-reporting exchanges that list the transaction as "short". This number is a relative number, not an accurate number, since batching of activity into a single tick means that if a single activity involved short-selling, the entire tick is marked as "short". I have asked Ihor Dusaniwsky to estimate actual shorting from a given "percent of selling by shorts" number, and he declined. Nonetheless, the number has value because as it rises or falls it gives a feel for the quantity of short transactions. At times when short interest is not increasing, a high percentage of selling by shorts number suggests churning of short shares by algobots with some possibly manipulative end in mind.

Looking at the tech chart, you can see a relatively small but important green day that will hopefully lead to other green days and an upward march of the stock price. Notice that the blue 50 day moving average is set to cross the 200 day moving average tomorrow for the golden cross. This will be a positive for the tech traders. Notice too that the upper bollinger band is a full 25 above the current stock price, which gives lots of headroom for strong trading days.

Conditions:
* Dow up 115 (0.42%)
* NASDAQ up 47 (0.56%)
* TSLA 317.47, up 4.16 (1.33%)
* TSLA volume 8.6M shares
* Oil 56.54
* Percent of TSLA selling tagged to shorts: 41%

 

[Papafox]

Today TSLA traded in a volatile manner and closed close to neutral, just as the macros did. The initial MMD was short and quickly defeated, which led to a macro-enhanced climb over 323, but when the NASDAQ dipped quickly, so did TSLA. Throughout the afternoon we saw a game of whack-the-mole develop in which TSLA was pushed down into the red but recovered multiple times. Finally, the macros saw a quick decline in the final minutes, which TSLA also emulated in the final minutes. Interestingly, 903K shares traded hands in the final minute, which suggests to me there's plenty of wheeling-and-dealing going on behind the scenes. The number of 320-strike calls that expire on Friday is high, about 6K, so expect some manipulations throughout the week in an attempt to keep TSLA below 320 for Friday's close.

News that could have affected today's trading:
* Tesla reaches battery supply deal with CATL
* Tesla and Walmart settle lawsuit regarding solar panel fires
* No final approval for Tesla to sell China-made vehicles in that country came through today. Bulls may be playing this issue safe and waiting for final approval before jumping in further, but my understanding is that the certification of China-made Teslas is a normal and necessary step and there's no reason to believe it will be delayed any longer than necessary.

The NASDAQ was up for most the day and barely closed in the green after a last-minute dip. It closed up 0.02%.

Once again, TSLA shorts were tagged with 41% of the selling today (on FINRA-reporting exchanges), but I believe the 903K shares traded at 4pm suggests there's mischief afoot involving selling during critical market moments and covering at 4pm or at other times when the buying does not affect the stock price.

Looking at the tech chart, I can say "congratulations" to fellow longs with the 50 DMA performing a golden cross of the 200 DMA. This is yet one more reassurance to big investors who use technicals that TSLA is looking healthy. Meanwhile, the upper BB is now more than 28 above the stock price and the climb of the upper BB continues. Although we would all like to see a robust rise now of the stock price, that will come with the right news. In the meantime, TSLA continues to cement its position as a greater than 310 stock, and while the hedge funds may possibly succeed in keeping TSLA below 320 for Friday's close, the longer TSLA remains above 310, the more confidence investors will have regarding TSLA's trajectory from here.

Conditions:
* Dow up 31 (0.11%)
* NASDAQ up 1 (0.02%)
* TSLA 317.22, down 0.25 (0.08%)
* TSLA volume 6.9M shares
* Oil 56.96
* Percent of TSLA selling tagged to shorts: 41%

 

[Papafox]

TSLA showed strength in pre-market with no noticeable Mandatory Morning Dip. Nonetheless, the hedge funds apparently felt the need to test the resolve of TSLA investors, and so at 11:04am the stock bottomed out below 315 and then recovered. Such a quick reversal of a dip can lead to a rally, and so the dip was met with a game of whack-the-mole, and with a lot of money up for grabs with 320-strike calls that expire on Friday, it looked as if the hedge funds were successfully managing the threat. Lo and behold, though, two pieces of news came forth today:
* Elon tweeted that Tesla's cyberpickup would be revealed on Nov 21 and
* China media is buzzing about a Nov 11 Made-in-China Model 3 launch

These two news items continued the upward pressure on TSLA and you can see that from about 1:30pm-2:30pm, TSLA was being capped at 320 by the hedge funds. We'll never know if those two stories would have been enough to break this afternoon's cap, however, because around 2:45pm word came out S&P had upgraded their outlook on Tesla from negative to positive. Boom!

Let me just add that Q4 continues to look very strong. Here's a chart tweeted by Franco Mossotto that compares the vehicles shipped in Q4 to previous quarters:

Q4 looks very strong when you look at shipments overseas

The NASDAQ closed down 0.29% today and was not a serious driver in TSLA trading today. Even the NASDAQ dip is out of synch with the 11am test of TSLA investor resolve.

TSLA shorts were tagged with 42% of selling today

Looking at the tech chart, you can more clearly see the nice transition from profit-taking to consolidation to further climb, following TSLA's massive run-up. I suspect with the rating agency change of position on Tesla, we're going to see more shorts running for the exit. Volume today was a modest 7.7 million shares and I wouldn't be surprised to see a jump in volume tomorrow.

If some hedge funds are indeed choosing to manipulate TSLA rather than delta-hedge their call option sales, they have again set themselves up for quite a bruising and at some point may decide this tactic ain't such a good idea anymore.

Looking forward to tomorrow.

Conditions:
* Dow down 0 (0.00%)
* NASDAQ down 24 (0.29%)
* TSLA 326.58, up 9.36 (2.95%)
* TSLA volume 7.7M shares
* Oil 56.36
* Percent of TSLA selling tagged to shorts: 42%

 

[Papafox]

Today the macros were smiling, at least for most the day, and TSLA used this opportunity to extend yesterday's rally. Notice that with TSLA doing most of its gaining yesterday in the afternoon, this was a great setup for rally day 2. What impressed me most about today was the volume of over 14 million shares traded. This is a rise with conviction. What's strange is the large number of analysts who have low price targets (down in the 200s, which is so Octoberish) and I expect many of these analysts to be shamed by the price increase and chase it with their targets because they look too ridiculous if they don't.

As with the previous high point of this rally, the stock price had difficulties hanging onto 340. This is now the point of resistance that must (and will) be conquered. Friday is a tough day, due to option expirations, just like last week, but next week will be an excellent opportunity for climbing above 340. We've reached a far fairer price now for TSLA compared to previous weeks, so at some point one can expect some possible short-term ups and downs. With a solid Q4 coming and with prospects for S&P500 inclusion next year looking good, I'm more inclined to keep my bet oriented for longer-run trading now, rather than getting too caught up in trying to play the next dip. We knew there was likely to be profit-taking after the Q3 ER run-up completed, but predicting other dips is a much more difficult matter. Considering where TSLA will be in mid-to-late 2020 is a far easier call and a better bet. Don't underestimate what this stock can do in the next 6-15 months.

Take a look at the big dip in the NASDAQ after 2:30pm. The index still climbed 0.28% today but lost most of its value in the final hour and a half of trading. Now look at TSLA and you will see the stock not batting an eye during the final hour and a half. Impressive.

Looking at Dusaniwsky's latest chart, you can see that this week's run higher was not so much a short-covering rally as it was an opportunity for longs and momentum traders to jump in. Short interest actually increased in the past couple of days, if we can believe the chart.

The slow creep upward continues with percent of TSLA selling tagged to shorts reaching 43% today

Looking at the tech chart, I have changed the blue line from 50 day moving average to 100 day moving average to show that the 100 day is rapidly preparing to cross the 200 DMA. All these developments are a plus for technical traders. Check out how TSLA ran into the same resistance point as 8 trading sessions ago. 340 is the new 320 challenge for this stock. With upper bollinger band above 355, we still have lots of headroom for price appreciation without crimping the style of big institutional buyers, if any are accumulating at this time.

Conditions:
* Dow up 182 (0.66%)
* NASDAQ up 24 (0.28%)
* TSLA 335.54, up 8.96 (2.74%)
* TSLA volume 14.3M shares
* Oil 56.92
* Percent of TSLA selling tagged to shorts: 43%

 

[Papafox]

Today I slept in (market opens at 4:30am Hawaii time) because I figured the day was going to be too predictable. MMD- check, whack-the-mole- check, pin by hedge funds at 335 for the close- oopsy. Yes, I have to smile because the really nice run-up of the NASDAQ in the final hour of market trading made the manipulations just too tough and the price got away from the hedge funds and market makers. Notice the big dip that bottomed out just 10 minutes before close and then boom. Close but no cigar.

I think the reason we saw such a big recovery of the stock price into close was that traders and investors remain optimistic that TSLA has more climbing to do. We also have seen fairly consistent positive returns in the past two months for those traders who buy on Friday and then sell on Monday. Usually there's a Monday morning buyer's exuberance that runs up the SP even if the close isn't so positive. This past Monday the hedge funds were ready to kill the Monday morning exuberance run-up with a prolonged MMD, but once that dip was over TSLA rallied for the remainder of the day.

The NASDAQ gained 0.48% for the day, with an impressive run in the final hour.

In news today, Elon tweeted to short-seller David Einhorn, calling him to task for implying Tesla was using underhanded methods to pad its 3Q ER results. Elon even offered a guided tour of the Fremont Factory in an attempt to get Einhorn to see that Tesla is a really bad company to short right now. His tone was humorous and suitable for a CEO, IMHO. I believe that if Q4 continues to shape up as positively as we think it will, there will be considerable carnage in the ranks of the shorts. This offer to Einhorn is an effort to not only take on the short for promoting falsehoods against Tesla but also I think there's a reasonable chance Einhorn will see that he's on the wrong side of this bet and will change his tune. If that happens, the short camp will be in further disarray, which would be simply lovely for us longs. Ask yourself, too, if Q4 looked right now like it was going to be a disappointment, would Elon be taunting Einhorn publicly like this and taking on liability for pumping the stock without justification?

TSLA shorts were tagged with 41.5% of selling today

Looking at the tech chart, the upper bb continues to give lots of headroom. It was up to nearly 360 today. The post-profit-taking resumption of the rally remains alive and well.

Notice that around October 7 or so TSLA was trading at times during the day below 230. Thus, in a little more than a month our stock has gained more than $100. About time! Notice too that TSLA is slightly lower today than the high on the third day after the ER. It's been a completely necessary week and a half of profit-taking, consolidation, and recovery. Now, however, TSLA is nipping at 340 and much more ready to continue an ascent than right after the ER's 3 day climb.

For the week, TSLA closed at 337.14, up 23.82 from last Friday's 313.31. It's been a good week. Enjoy your weekend. Get some rest and properly hydrate yourself, for we have 340 and 344 to take next week and then press on toward higher values.

Conditions:
* Dow up 6 (0.02%)
* NASDAQ up 41 (0.48%)
* TSLA 337.14, up 1.60 (0.48%)
* TSLA volume 6.0M shares
* Oil 57.24
* Percent of TSLA selling tagged to shorts: 41.5%

 

[Papafox]

Today TSLA rose quickly, taking out the 340 resistance point in pre-market trading and slicing through 344 like a knife through soft butter once market trading began. Apparently you investors got your rest over the weekend and entered the trading week well-hydrated. Nonetheless, alternate explanations for today's climb exist:

* Jefferies raised their TSLA price target from 300 to 400. Although an analyst upgrade may not seem too powerful compared to other factors, having an expert tell investors that they think TSLA is going to 400 has a psychological effect. Investors look at 340 and it looks like an excellent price for a stock on its way to 400. This is the same psychological impact that Adam Jonas's $10 price target had on TSLA not so many months ago, but of course a fear-inducing response rather than a FOMO-response.

* In Shanghai, Tesla is showing to a wider audience the first Model 3s made in the country.

* Check out this post by TMC's @ReflexFunds , which very well lays out the dynamics of why a rapidly-climbing TSLA stock price creates its own tailwinds. Much of his view agrees with principles I've been saying here that rising stock prices put margin pressures on shorts, which causes some to cover, which leads to more climbing. Also, the large number of out of the money call options need to be delta-hedged by market makers (excluding calls that might have been sold by rogue hedge funds and not delta-hedged), which means buying stock to hedge, which pushes the stock price higher. He mentions other dynamics as well. The post is worth a look.

The take-away from what we're seeing is that there really is an opportunity for considerably more appreciation of the stock. This very well could be the rally for which you've waited and suffered two years. Don't sell too soon.

The NASDAQ opened low, but that didn't hurt TSLA. The NASDAQ climbed to close down 0.13%

The Opricot.com max pain chart is greatly distorted by the 80K+ put contracts at $50 which will be expiring without value on Friday. This week's hottest call strike price is 350, and so we should expect some effort to hold TSLA short of that number on Friday. Nonetheless, once the steamroller of short-covering plus delta-hedging on stock price appreciation gets moving, the hedge funds often lose the ability to stop it. Keep in mind, too, that with TSLA above 345, the shorts are feeling LOTS of pain and further price increases will lead to more covering through margin calls alone.

TSLA shorts were tagged with 42.5% of selling today

Speaking of pain felt by the shorts, it looks like they're about to cross the $6 billion loss mark since early 2016.

Today the upper bollinger band rose to 365 and the 100 day moving average is climbing like a Falcon 9 towards the red 200 day moving average. Speaking of Falcon 9s, SpaceX had another successful mission today. Stepping back a bit, I have listed the closing highs of several peaks we've seen in the past 3 years of TSLA trading. It looks like the mid-380s takes us into ATH territory, and that's about $40 away.

Conditions:
* Dow up 10 (0.04%)
* NASDAQ down 11 (0.13%)
* TSLA 345.09, up 7.95 (2.36%)
* TSLA volume 9.9M shares
* Oil 56.94
* Percent of TSLA selling tagged to shorts: 42.5%

 

[Papafox]

Today the NASDAQ was up, which meant the hedge funds had to play some defense to keep TSLA in check. Thus, we saw a MMD that was quickly defeated and turned into a run up to 348. Alas, from about 12:45pm until about 2:15pm, we saw what appears to my eye to be a algobot walkdown of the TSLA stock price while the NASDAQ was mostly level and no negative news was afoot. I suspect this was the second manipulation of the hedge funds for the day.

Then on the main TMC investor forum we saw this post by @ReflexFunds in which he realized that GF4 was going to be in Germany. With Elon attending an award event in Germany that evening, it was likely he would announce the factory (and he did). The climb into close was magnificent and ended just a few pennies south of 350. The tug-of-war to see if TSLA would remain above 350 (it reached that mark 3 minutes before close) included huge volumes, as high as 92K per minute. Some TMCers bought shares and calls after the early tip about the GF4 location and made a few dollars today on the news. Bravo.

The good news coming from Tesla is relentless.

The NASDAQ closed up 0.26% today. Most of TSLA's dip took place before the NASDAQ began its descent.

This revised chart by Dusaniwsky takes into account the 10/31/19 short interest of 31.8 million shares shorted as reported by NASDAQ. With nearly 32 million shares still shorted, and with the stock price still rising, there's room for margin calls to soon lead to more covering.

Looking at the tech chart, the upper bollinger band continues to offer lots of headroom for climbing. Notice, too, that so much of the recent gains of the stock have been gap ups over night.The gap-ups are a reason why traders have been watching for afternoon push-downs so that they can buy at the end of the day and enjoy the gap-up to next day opening. It's a case of the hedge funds repeating a behavior often enough so that the traders learn how to profit from it (and thereby neutralize it).

Conditions:
* Dow up 0 (0.00%)
* NASDAQ up 22 (0.26%)
* TSLA 349.93, up 4.84 (1.4%)
* TSLA volume 7.2M shares
* Oil 56.55
* Percent of TSLA selling tagged to shorts: 42%

 

[Papafox]

Today there was good reason for the SP to be running above 350 in pre-market trading. Tesla has now acquired its China manufacturing permit, allowing the company to begin turning out large quantities of vehicles. Additionally, we learned that Tesla will receive subsidies for locating GF4 near Berlin in Germany and that local officials are trying to keep the factory build time on par with GF3's progress. All good.

Nonetheless, we saw 235K shares traded at the 9:30am open, and with elevated volume we saw a price pushdown. It recovered, but starting about 10:00am the hedge funds apparently threw the "take her down" algo switch and despite the NASDAQ rising through 2pm, TSLA descended until a game of whack-the-mole ensued for most of the remainder of the market trading day. Alas, in the final 40 minutes the hedge funds got serious and pushed TSLA down for a close around 346.

Why do I blame the loss on selling by hedge funds? A flurry of volume accompanied the final 40-minute dip and this type of selling certainly is not the hallmark of a big institutional investor shedding shares. Notice the various icicles that makes TSLA look like its sky is full of tornadoes. This type of heavy selling followed by near immediate recoveries is a fingerprint of you-know-who.

The NASDAQ gained altitude and climbed into the green by early afternoon, but some trade news caused a 2pm dip that almost fully recovered by 3pm. TSLA's gyrations were opposed to the NASDAQ's movements most of the day.

So, if momentum was positive coming into the day, news was good, and macros were not the problem, the selling strategies today look pretty clearly to be hedge fund manipulations. Keep in mind, too, the ferocious selling we saw yesterday as TSLA climbed above 350 for a few minutes. Someone apparently has lots to lose if TSLA soars above 350 this week. Let's see what the opricot.com max pain chart shows.

As you can see from the second chart, 350, 355, and 360 call options are the most active this week. From the top chart, the 350 calls are at 8.6 million set to expire on Friday. That's a lot of money on the line and so the hedge funds apparently are manipulating rather than delta-hedging to try and save their bacon.

With the hedge funds willing to sell heavily to protect 350, I would not be inclined to buy weekly calls. Next week, the quantity of calls expiring will be lower, and so the incentive to manipulate will also be lower.

Conditions:
* Dow up 92 (0.33%)
* NASDAQ down 4 (0.05%)
* TSLA 346.11, down 3.82 (1.09%)
* TSLA volume 8.4M shares
* Oil 57.58
* Percent of TSLA selling tagged to shorts: 44%

 

[Right_Said_Fred]

Papafox, thank you for another interesting analysis. Question (if you have time): you are making a connection between hedge funds and the large number of calls that have to be delta-hedged or, if they are not being hedged, have to be ‘dismantled’ through downward manipulation of the SP. I always thought it was market makers who have to cover or hedge for the calls (and puts) they sell? And I believe they do so immediately. How are hedge funds also involved?

 

[EVNow]

How are hedge funds also involved?

Not Papafox - but I think the idea is that Hedge funds are large players in the options market and they sell naked calls and then short TSLA to protect their naked calls.

It makes some sense.

Lets say Hedge funds decide the market won't support TSLA if it goes above $X. So they sell calls with strike at $X (or $X+small buffer). But if the SP goes over the strike price, they will short it - because they anyway believe the market won't support the price.

 

[Ocelot]

Most of the conversation flutters above my head with respect to advanced trading. I would like to share this, though, I am not sure if is directly relevant, it might give a bit of insight.

I was talking with one of the biggest hedge fund managers/owners in Canada. At the time we had discussion about TSLA. I was long, he was short. One thing that stuck with me was his goal was to be "right" 50.1 per cent of the time. He noted if he is, he makes lots of money. I guess thats where the name hedge fund comes from, but it gave me a better perspective on things.

 

[Papafox]

Papafox, thank you for another interesting analysis. Question (if you have time): you are making a connection between hedge funds and the large number of calls that have to be delta-hedged or, if they are not being hedged, have to be ‘dismantled’ through downward manipulation of the SP. I always thought it was market makers who have to cover or hedge for the calls (and puts) they sell? And I believe they do so immediately. How are hedge funds also involved?

My views on manipulations have evolved over time from a general view of short-sellers being the culprit to hedge funds being the primary drivers of manipulations. @Sancho suggested hedge funds specifically, and as I looked at the evidence, day after day, his explanation fit the market's behavior the best. I noticed that in typical manipulations, the frequently bought puts seldom were manipulated into the money, and so I dismissed the manipulators as being the type of shorts who would buy puts (we also know that some puts are bought by longs for the purpose of hedging).

Certain hedge fund sellers of the call options are a different matter, though. Regular market-makers tend to delta-hedge (through buying or shorting shares) in order to stay somewhat neutral regarding sold options and they make their money primarily from the decay of time value. Hedge funds sometimes hold net short positions in TSLA, however, and if they're big enough they can exert market-moving influence on the stock. Instead of delta-hedging as TSLA rises, my theory is that some hedge funds manipulate to prevent the rise above the strike price of heavily sold calls that are about to expire. After all, delta-hedging tends to enhance the prevailing stock trend, and that's not what the hedge funds want. The more frequently the theory can predict what will happen, the more likely the theory is true. I have so far found no better explanation of the manipulative behaviors we see when TSLA's rise threatens the most popular call strike prices that expire in any given week.

So often, the apparent manipulations are MMDs, near-linear walk-downs in the stock price that take place in low volume trading hours, capping, whack-the-mole, or deep push-downs in the final 45 minutes of market trading. I believe the linear push-downs like we saw yesterday morning are the work of hedge fund operated algobots that are referencing the available data in the order book and methodically selling and rebuying as necessary to achieve the push-down without substantially increasing net short position by day's end. They also pulled off a late-after push-down into close. I look at these push-downs and late-afternoon plunges which are not macro or news supported, and they make no sense from the standpoint of a long investor trimming shares.

The problem for the hedge funds right now is that TSLA investors are not as skittish as before. It's much harder to get a downtrend started and make it continue. Last week the appetite for buying dips was immense. I suspect any hedge funds involved in manipulating TSLA rather than delta-hedging its sold calls has taken big losses these past two months.

 

[Papafox]

Once again, the theory that this week's trading is being dominated by hedge funds which sold calls at 350-strike still rings true. We saw two morning dips, the second one near 10am was the deepest. When it was defeated we didn't see the immediate run upwards well into the green as we usually see. Instead I think there was a capping effort to keep expectations for today low. We still keep finding buyers for the dips, and until that changes the dips are limited in depth and duration.

Around noon the stock ran quickly upwards to top out at 353, but the hedge funds apparently threw the "bring the price under tree fiddy" button and the algos went to work.

News:
* Consumer Reports has now moved Model S and Model 3 to its recommended status. This news likely was the catalyst for the noon run-up.
* On CNBC- Colin Rusch spanked WSJ's Charley Grant's fanny in a debate about how well Tesla is doing.
* In the category of throwing old TSLAQ wives tales at the media and seeing if anything sticks, Credit Suisse dredged up the old "competition is coming" argument on CNBC and predicted doom, pestilence, floods, and, well... maybe I got carried away there.

The thing about 350 is that this level has not been identified as an important point of resistance. We've been above it 3 days this week. It's not like there's an unlimited number of sale orders sitting there untouched. Instead, 350 is the first of several high levels of call options that will expire on Friday, and if someone is working this hard to make sure that TSLA closes below 350 every day this week, I suspect the hedge funds feel severe pressure to keep the stock price below that number and that therefore they have not been delta-hedging.

The NASDAQ traded down most the day, but not that far down and closed in the red 0.04%

Looking at the tech chart, you can really see the blockade at 350. We climb above it, but someone is determined for TSLA to close below that level every day this week. I suspect we break free of the 350 hedge fund tractor beam early next week as investors anticipate the cybertruck reveal.

Conditions:
* Dow down 2 (0.01%)
* NASDAQ down 3 (0.04%)
* TSLA 349.35, up 3.24 (0.94%)
* TSLA volume 6.2M shares
* Oil 57.06
* Percent of TSLA selling tagged to shorts: 40%