Papafox's Daily TSLA Trading Charts

[Papafox]

News over the weekend resulted in futures bottoming out at 5% down, but recovering from time to time. No doubt was left come pre-market trading today, however. Notice the big dip about 15 minutes into trading? This was when trading restarted after halting because of an opening price more than 7% down. Prices of TSLA largely followed the NASDAQ, with a rise until about 11:20am and then a decline for most of the day. At opening TSLA was already subject to the Alternative uptick rule, but that rule was reset for yet another 2 days as TSLA lost more than 10% today.

The NASDAQ dipped sharply in the final 20 minutes, likely owing to the POTUS press conference in which the chance of a recession was mentioned. Naturally, the press attributed TSLA's decline to this RBC downgrade, which was just as ridiculous as attributing a previous dip on a 9% down macro day to an Adam Jonas downgrade.

Volume of TSLA was moderately high at 20 million shares. With the broader markets down a bit over 12%, TSLA's 18% drop yielded a 1.5X multiplier, which was about what NVIDIA experienced, as well. If the broader markets keep dropping, does TSLA keep plunging? Not at these multipliers. At some point the price of TSLA considering its post-COVID-19 value gets so low that buyers simply outnumber sellers.

Don't think that there's no shenanigans by manipulators just because the percent of selling by TSLA shorts was a low 31.9% today. @Artful Dodger offers in this TMC link more proof of substantial naked shorting today.

Both the Dow and NASDAQ closed down more than 12% with the NASDAQ showing a decline of 12.32%

Looking at the tech chart, you can see that the lower bollinger band didn't offer much support today, partially due to the magnitude of the macro force, and partly due to the steep downward angle of the band.

So, how low does TSLA go? At some point, investors will look at potential short-term downside (25% more?) vs. potential medium-term upside (100% plus?) and conclude the risk vs. reward equation doesn't allow selling to be a sensible course of action. Certainly a macro bottoming would do it. Here are a few possible scenarios of when the macros could bottom out:
* When investors fully understand the situation- Unfortunately today the mention by a press correspondent of "recession" lit the fire of fear during the final 20 minutes of market trading and you can see the results in the NASDAQ chart above. Further, the extent of the damage in the U.S. from the virus needs to be approximated. Goldman put out a briefing today saying that 50% of Americans will get the virus. In China and South Korea, less than 1/2 of 1% of the populations of these countries will get the virus before it fades into summer. Until investors can get a handle on the numbers, they're going to be running scared. Fortunately, when the new cases discovered each day graph shows that the U.S. has peaked, the necessary info is available, a sigh of relief comes forth, and the bottom is achieved.
* When max fear has come and gone- As I have been saying, I think macros get worse when substantial testing in the U.S. begins, which should be this week and next. That big jump due to better detection, will cause a further decline.

It's also possible for TSLA to bottom out before the macros because of the aggressive multiplier that the stock has been reacting with to the macro drops. This is why I did yet another small buy this morning. Chances are, we're weeks from the TSLA bottom, but I believe we're close enough that a small buy now still made sense. Since that purchase, a few negative stories have come forward:
* This post (with link) in TMC by @Fact Checking details the Santa Clara County (Edit "Close to" where the Fremont factory is located) plans for curtailing the virus, and could lead to a closing of the Fremont factory (but maybe not).
* Some countries in Europe such as France are in lockdown now and no more Teslas will be delivered there before quarter's end. Fortunately, the last Roro ship with Teslas on board arrived Zeeburg and has since begun passage to Southhampton.

If you could put me in a time machine, transport me back to when TSLA was trading at 900, my strategy would of course have been different, but given the risk vs. reward equation going forward at the present stock price, I will continue to be a small buyer and not a seller of TSLA. When Trump mentioned July as an end to the U.S. wave of this virus, Anthony Fauci mentioned it could be earlier. Yes, my friends, this craziness will end and when it does we will own shares in a company well-positioned to shine.

Conditions:
* Dow down 2997 (12.93%)
* NASDAQ down 970 (12.32%)
* TSLA 445.07, down 102 (18.58%)
* TSLA volume 20.5M shares
* Oil 28.86
* Percent of TSLA selling tagged to shorts: 31.9%

 

[mblakele]

Santa Clara County (where the Fremont factory is located)

Minor correction: Fremont is in Alameda County. Doesn't really matter, because both counties announced very similar measures today.

 

[Papafox]

Today the market reacted positively to news that a big stimulus package is coming, and the NASDAQ closed up 6.23% while TSLA closed down 3.34%.

To aid our comparison, I include identical charts of TSLA and NASDAQ below, with TSLA on top:

Displayed are the TSLA and NASDAQ market trading charts, with TSLA on top. The NASDAQ closed up 6.23% and TSLA closed down 3.34%. Look at the heights of the 3 peaks in each chart to understand what is going on.

Today was the second recent day in which TSLA closed negative on a big up macro day. Last Friday, the NASDAQ closed up over 9% and TSLA down about 2.5%, for a net difference of about 12%. Today that net difference was over 9.5%. What I see is two issues: net weakness of TSLA relative to the NASDAQ which is unrelated to the typical multiplier, and relative weakness of TSLA in late afternoons vs. the NASDAQ.

Regarding the relative weakness of TSLA, my best guess is related to how this MarketsInsider article grossly distorts the analyst's conclusions with its heading "One expert says Tesla's stock is still expensive, despite plummeting 40% amid the coronavirus market sell-off (TSLA)". The article's bold bullet points highlight the analyst's base value for TSLA of $300-500. Someone who just glances at this article would come away with the impression that Toni Sacconaghi of Bernstein thought that TSLA was only really worth $300-500 before the coronovirus dip, but if you read the article it's quite different. Sacconaghi has retained a $730 price target on TSLA and the $300-500 relates just to the basic auto business, with additional value being added by energy, autopilots, etc.

I think this "Tesla is still priced too high" idea is the misconception that is currently out there, that TSLA was greatly overpriced before the virus correction happened and that maybe its worth a whole lot less than what it's current trading at. Such a perception misses the point that the run higher in value for TSLA came when earnings showed improved margins, plenty of demand, large cash generation quarter after quarter, a huge factory about to open in Shanghai, Model Y about to be released, etc. Nonetheless, I think in times of fear you get some investors reacting without looking at the reality behind the numbers. With TSLA still up compared to a year ago, there's plenty of room for misinterpretation.

Concerning the dips in the afternoons, particularly late afternoons, I have two theories. One is that with lower volume in the afternoons, there are fewer ready buyers in afternoons, but selling pressure doesn't decline as quickly in afternoons as buying pressure, and so the net mismatch yields lower prices before the two come back into sync. The other explanation is that in late afternoons, when the volume is light, we see manipulative selling to cap or reduce run ups. The extremes between TSLA and the NASDAQ were huge in the final 30 minutes of Friday trading, and you can see when comparing the charts above that afternoon is when TSLA departed most significantly from what the NASDAQ was doing.

TSLA is trading right on the lower bollinger band again, but the tough part in this correlation is drawing any cause/effect relationships. Is TSLA following the lower bb or is the lower bb tagging along and following TSLA now?

The implications in my "market is discounting TSLA's rise from 300s to 900s" theory is that price may fall lower than what we originally expected, but the recovery, when it is rediscovered that all the reasons for that rise from 300s to 900s are still intact, would be truly spectacular.

Conditions:
* Dow up 1049 (5.20%)
* NASDAQ up 430 (6.23%)
* TSLA 430.20, down 14.87 (3.34%)
* TSLA volume 23.8M shares
* Oil 28.86
* Percent of TSLA selling tagged to shorts: 38.6%

 

[Papafox]

Today was another one of those crazy multiple days where the NASDAQ dipped 4.7% and TSLA dipped 16%, for a ratio of 3.4X. What's particularly interesting is the trading where TSLA leveled off below 360 for the final 2 1/2 hours and traded mostly level, before moving up slightly into the close.

I was a buyer in the 350s today as I see this level as a local low and close enough to the eventual low that I won't regret getting in here. I say "local low" because buyers prevented TSLA from going down further, particularly during the NASDAQ's 2:30pm bottom. With the current macro information and news of TSLA, there was solid appetite for buying as TSLA approached 350.

I also say "local low" because this virus market is indeed going to be lumpy. According to Deborah Birx, in the next 4 to 5 days we're going to see a jump in the number of COVID-19 new cases in the U.S. as testing expands dramatically. This news could create a macro dip, and we could possibly see a TSLA dip alongside the macro dip. If that happens, I will complete my buying for this coronavirus dip, grab some popcorn, and hang on for the ride and recovery.

In news, Tesla reached an agreement with the Alameda Sheriff that it would reduce its staffing to 25% of normal. There's some confusion right now whether Tesla will be able to build cars, but I cannot imagine Tesla staffing 25% and not building cars. If cars continue to be built, then this compromise may suit Tesla well over the coming weeks and allow Model Y production to continue speeding up.

In delivery news, most European countries are still seeing deliveries, but in some such as Germany, deliveries may be halted. Meanwhile, the San Francisco Bay Area has a lockdown in place, and so we'll have to see if there is a way for Tesla to deliver vehicles to these customers or whether their vehicles will be assigned to customers outside the bay area 6 counties.

Our chart above shows no major changes in after-hours trading price, but the extended after hours trading showed TSLA up nearly 12%. That was at a time with positive macro futures. At the time this post is being written, futures were down 2.5%, so much can change by opening. I suspect that much of the enthusiasm for Tesla has to do with removing doubt about the factory's ability to remain open. As the news changes, it will likely affect the stock price.

The NASDAQ lost 4.7% today.

Today's trading fell below the lower bollinger band, which is not surprising.

Where does TSLA go from here? The support above 350 suggests that there are buy points for this stock that will resist the push down. A strong enough down force can defeat a support level, but a new support level is found, and the game resumes. I suspect we'll find support at 300 too, if it goes down that far. At some point, selling TSLA at these prices becomes a ridiculous activity as the downside risk shrinks to 20% or so and the upside opportunity increases to 300% or more. Eventually, perhaps after next week's bigger COVID-19 numbers in the U.S., TSLA hits a hard bottom where buyers are too plentiful for the stock to penetrate, and we see a real bounce. Looking forward to that day and keeping the last of my dry powder ready to take advantage of any further dips.

What would temper my expectations would be an inability for the U.S. and European countries to reproduce the quick turnarounds of COVID-19 such as we've seen in China and more recently South Korea. My source continues to be this worldometers site.

In the meantime, watch this stock carefully, because we're trading $130 below the ridiculously low Morgan Stanley price target, even more below the Bank of America bearish price target, and about $700 below the most bullish price targets. At some point the fear of falling gives way to the fear of missing out (FOMO). Can't wait. With today's big dip, I think the chances of TSLA turning around before the macros has increased, so keep an eye on the stock price if you plan to accumulate more.

Conditions:
* Dow down 1338 (6.30%)
* NASDAQ down 345 (4.70%)
* TSLA 361.22, down 68.98 (16.03%)
* TSLA volume 23.2M shares
* Oil 23.41
* Percent of TSLA selling tagged to shorts: 41.7%

 

[Papafox]

Today was TSLA's turn to outperform the NASDAQ by a massive multiple. The NASDAQ closed up 2.3% while TSLA closed up 18.4%, a multiple of 8X. It's fair to say that FOMO has returned. From here forward, investors need to balance Fear of Falling (FOF) with Fear of Missing Out (FOMO). The question on everybody's mind right now is whether 350 will be the bottom for TSLA. Volume of over 30 million shares suggests lots of energy behind today's gain.

You'll notice when comparing TSLA to QQQ or NASDAQ in the charts below that TSLA reflected macro movements, but with a super-strong bias on the positive side.

What led to such positive trading during market hours? I think the answer is that yesterday's push lower was so extreme that many investors such as myself concluded that if this wasn't the low, it was close enough to the bottom as one needs to get to extract close to maximum appreciation from the stock, and we bought. Thus, as the macros continued to dip yesterday afternoon, TSLA traded level during this time. Those investors who missed the opportunity to buy yesterday made up for it today, and TSLA was off to the races, trading higher than 440 before settling down.

In after-hours trading, TSLA traded level for the first hour and then fell significantly about 5pm Eastern Time. This was when news stories such as this Electrek article came forth, describing Tesla's plans to abide by county desires and closing the Fremont factory on March 24. You'll notice that TSLA recovered some of its losses after the initial after-hours dip, perhaps because investors realized that TSLA still has 4 more days of production left this quarter and that during the final 7 days of the month, it's questionable about just how many vehicles could then be delivered within the quarter. In other words, all of the negotiations on the closure issue have resulted in a Q1 that will be somewhat closer to normal than if the Fremont factory closed on day one of the bay area decree. The Buffalo GF2 will also close but GF1 in Reno will remain open.

The QQQ chart reveals that the big TSLA dip at 5pm was because of Fremont factory closure story, rather than macro-related

Notice the extent of the dip of QQQ and NASDAQ on open and just prior to close. We did not see such volatility with TSLA today to these dips. The NASDAQ closed up 2.3%

Looking at Dusaniwsky's chart, short sellers have been closing their positions at a rapid pace during this plunge. We're down to 17 million shares shorted, which is well below the 25 million + shares we've seen shorted not long ago.

Percent of selling by TSLA shorts jumped hugely higher today to 61.1%, suggesting lots of manipulations.

Looking at the tech chart, you can see the enormous rise from today's trading, which brings FOMO back into the minds of investors. After-hours trading has reduced TSLA's price below 400, and with futures in the red for Friday, the big question is how much of a buying opportunity will the day allow?

This is Post 1 of 2 today. Come back and see 2 of 2 for the full perspective.
Conditions:
* Dow up 188 (0.95%)
* NASDAQ up 161 (2.30%)
* TSLA 427.64, up 66.42 (18.39%)
* TSLA volume 30.2M shares
* Oil 26.32
* Percent of TSLA selling tagged to shorts: 61.1%

 

[Papafox]

Part 2 of 2

How do we get the macros to support our stock better? It comes down to a question of how severe the market thinks the U.S. coronavirus experience will be and upon actual market volatility.. Here's my take.

What I'm talking about here is observed market reactions to news.

* POTUS press conferences- When the POTUS downplays the severity of the pandemic, the market reacts negatively. When he says, "Hey this "sugar" is really bad and here's the major steps we're taking to address it, the market reacts positively.

* South Korea or Italy- The market clearly wants a situation that is closer to the experience of China and South Korea than to Italy's. To judge how the U.S. and European countries are doing, I use this link to worldometers.info COVID 19 data. On the landing page, click on the name of the country you'd like to look at and you'll see several charts including the new cases chart. Here's the chart for China:

In China's new cases chart, the worst was over in one month of chart time and new cases were minimal after 2 months

In South Korea's case, the peak rose and fell after 1 month, but if you look at the tail end, you can see some resurgence, which is the type of thing that makes markets uneasy.

In Italy's case, one month after cases were detected, the new cases chart is still gaining height. Even worse, the healthcare system in the country is overtaxed and deaths are running around 400 per day. This scenario makes the market very, very nervous.

Consider watching these countries and see how they perform. Watch the U.S. which is still in the building up stage. The experience of European countries will influence the sentiment of investors in the U.S., so let's hope to see some countries that peak soon and show the rest of Europe how to get there. Of particular interest is whether there's a herd immunity situation in Asia because of similar viruses that came earlier, and perhaps the situation in Europe and the U.S. would be worse. For this reason, seeing the first peak of a European country would be especially good news. When the U.S. peaks, there should be positive market sentiment.

Efforts such as school closures, shelter-in-place, social distancing, shutting down of restaurants, bars, and non-essential businesses all help to minimize the damage prior to peak, and from what I've seen the more such measures are imposed, the happier the market is.

* Anti-viral therapies- Medicines such as Remdesivir and hydroxychoroquine (when combined with a common antibiotic) likely can substantially shorten the duration of the virus and save lives. This article describes how a French study showed that 20 patients all managed to be virus free after 6 days of the hydroxychoroquine and antibiotic combo. The POTUS talked about these two anti-virals today. Although Remdesivir is being used extensively right now in the U.S. under compassionate use rules, bigger studies and FDA approval of these treatments for COVID 19 are still lacking. The POTUS also said that chloroquine will be allowed for compassionate use, as well. As they come in, and if they are significantly positive in conclusion, expect the market to respond favorably. FDA approval would also be a strong positive.

* Vaccines- One potential vaccine for COVID 19 just started human trials. When that vaccine or any of the others that are in development yield results that are encouraging (strong ability to avoid coronavirus and minimal side-effects) word will brighten the mood of the markets. Watch for it. Even if the vaccine is a year away, positive indications that it's coming will be regarded favorably by the markets.

* COVID 19 Testing- The virus will not be controlled until adequate testing is available. Fortunately, private labs are spinning up hugely this week and we already see an order of magnitude jump in number of test results. These results will of course lead to higher numbers on the new daily cases and I would expect some negative market sentiment to these numbers, but it's possible that Deborah Birx has done a good enough job on TV explaining why the numbers will jump that we may not see too over the top a response.

* Antibody Testing- One new technology that is so important it is almost essential and that is antibody testing. China has these tests and they may be a key to the very substantial success in getting its numbers very low. Here in the U.S., companies such as Biomerica have antibody tests that can be administered quickly in the field by a professional with a small blood draw and the results can be seen in less than 10 minutes. Cost per test is less than $10. Unfortunately, these tests are not yet FDA approved and so they will initially only be used in other countries. The drawbacks of these tests are that 1) someone who had the virus but now is well will still register positive and proof of previous medical clearance would be required and 2) someone who just came down with the virus may not have antibodies in their system yet. The incredible potential, though, is that all people in a population group can be tested because of low cost, easy administering, and quick (10 min.) results. You learn the truth of the infection, numbers that may indicate herd immunity already present in large numbers in some countries. Anyone who tests positive in the antibody test could then be given the normal throat swab test and the person could find out if they are currently carrying the virus. These cheap, quick tests could make the more expensive tests less necessary. Expect to see positive market reaction if FDA approval comes to any of these antibody tests.

The bottom line is that the market has so far responded positively to strong efforts to force social distancing and slow the virus's transmission. New anti-viral therapies, vaccines, and better testing will be positives. We wait anxiously for the first European country to peak and begin the downhill trek. The market watches too.

Market Volatility

I found the most enlightening view of what's going on behind the scenes in the market comes from Chamath Palihapitiya in this stunning interview on CNBC today. If you haven't already watched it, you really should do so now because it explains so much.

Regarding antibody testing for COVID 19 Palihapitiya explains it extremely well. He says the market is aching for a reason for a rally and widespread antibody testing could be the breaththrough that's needed.

Palihapitiya then really shows us the underworld of Wall Street. He says that only in bad times like this do we learn the truth of what's really going on. He says that huge hedge funds have been leveraged 10X, 11X, even higher and they're trying to unwind that leverage, which ends up causing these massive up and down whipsaw changes in the market. He says that your regular 401K investors are caught in the middle and a stock they own might fall 70% instead of 30% because of the volatility induced as these hedge funds deleverage. It's the man's hope that when the government hands out money to help businesses get through this crisis, CEOs who left their companies with vulnerable balance sheets because of stock buybacks (to artificially raise their own compensations) must pay a price, and a substantial one. He says it's absolute madness to allow these hedge funds to run with such leverage. It's like giving a baby a loaded gun.

After hearing about the degree of leverage of these hedge funds, I better understand what has been happening to TSLA's stock price on certain days. How about yesterday when TSLA dropped 16% to 361 when the market was down only 4%? One simply cannot explain such dips by rational and traditional reasoning. Keep those seatbelts fastened because this ride ain't smoothing out in the short run. We have both the uncertainty of the virus upsetting the market and we have a demon within the market that needs an exorcism so that this crazy volatility will be eliminated in future years.

I'll likely leave some dry powder sitting around just in case we see a day when the stock price becomes silly low. It would only do so because some overleveraged buyer has to sell, rather than wants to sell.

Fortunately, Tesla will still be a valuable company when the dust settles. In the meantime, keep yourself healthy.

 

[avoigt]

Part 2 of 2

How do we get the macros to support our stock better? It comes down to a question of how severe the market thinks the U.S. coronavirus experience will be and upon actual market volatility.. Here's my take.

What I'm talking about here is observed market reactions to news.

* POTUS press conferences- When the POTUS downplays the severity of the pandemic, the market reacts negatively. When he says, "Hey this "sugar" is really bad and here's the major steps we're taking to address it, the market reacts positively.

* South Korea or Italy- The market clearly wants a situation that is closer to the experience of China and South Korea than to Italy's. To judge how the U.S. and European countries are doing, I use this link to worldometers.info COVID 19 data. On the landing page, click on the name of the country you'd like to look at and you'll see several charts including the new cases chart. Here's the chart for China:

View attachment 523628
In China's new cases chart, the worst was over in one month of chart time and new cases were minimal after 2 months

View attachment 523630
In South Korea's case, the peak rose and fell after 1 month, but if you look at the tail end, you can see some resurgence, which is the type of thing that makes markets uneasy.

View attachment 523629
In Italy's case, one month after cases were detected, the new cases chart is still gaining height. Even worse, the healthcare system in the country is overtaxed and deaths are running around 400 per day. This scenario makes the market very, very nervous.

Consider watching these countries and see how they perform. Watch the U.S. which is still in the building up stage. The experience of European countries will influence the sentiment of investors in the U.S., so let's hope to see some countries that peak soon and show the rest of Europe how to get there. Of particular interest is whether there's a herd immunity situation in Asia because of similar viruses that came earlier, and perhaps the situation in Europe and the U.S. would be worse. For this reason, seeing the first peak of a European country would be especially good news. When the U.S. peaks, there should be positive market sentiment.

Efforts such as school closures, shelter-in-place, social distancing, shutting down of restaurants, bars, and non-essential businesses all help to minimize the damage prior to peak, and from what I've seen the more such measures are imposed, the happier the market is.

* Anti-viral therapies- Medicines such as Remdesivir and hydroxychoroquine (when combined with a common antibiotic) likely can substantially shorten the duration of the virus and save lives. This article describes how a French study showed that 20 patients all managed to be virus free after 6 days of the hydroxychoroquine and antibiotic combo. The POTUS talked about these two anti-virals today. Although Remdesivir is being used extensively right now in the U.S. under compassionate use rules, bigger studies and FDA approval of these treatments for COVID 19 are still lacking. The POTUS also said that chloroquine will be allowed for compassionate use, as well. As they come in, and if they are significantly positive in conclusion, expect the market to respond favorably. FDA approval would also be a strong positive.

* Vaccines- One potential vaccine for COVID 19 just started human trials. When that vaccine or any of the others that are in development yield results that are encouraging (strong ability to avoid coronavirus and minimal side-effects) word will brighten the mood of the markets. Watch for it. Even if the vaccine is a year away, positive indications that it's coming will be regarded favorably by the markets.

* COVID 19 Testing- The virus will not be controlled until adequate testing is available. Fortunately, private labs are spinning up hugely this week and we already see an order of magnitude jump in number of test results. These results will of course lead to higher numbers on the new daily cases and I would expect some negative market sentiment to these numbers, but it's possible that Deborah Birx has done a good enough job on TV explaining why the numbers will jump that we may not see too over the top a response.

* Antibody Testing- One new technology that is so important it is almost essential and that is antibody testing. China has these tests and they may be a key to the very substantial success in getting its numbers very low. Here in the U.S., companies such as Biomerica have antibody tests that can be administered quickly in the field by a professional with a small blood draw and the results can be seen in less than 10 minutes. Cost per test is less than $10. Unfortunately, these tests are not yet FDA approved and so they will initially only be used in other countries. The drawbacks of these tests are that 1) someone who had the virus but now is well will still register positive and proof of previous medical clearance would be required and 2) someone who just came down with the virus may not have antibodies in their system yet. The incredible potential, though, is that all people in a population group can be tested because of low cost, easy administering, and quick (10 min.) results. You learn the truth of the infection, numbers that may indicate herd immunity already present in large numbers in some countries. Anyone who tests positive in the antibody test could then be given the normal throat swab test and the person could find out if they are currently carrying the virus. These cheap, quick tests could make the more expensive tests less necessary. Expect to see positive market reaction if FDA approval comes to any of these antibody tests.

The bottom line is that the market has so far responded positively to strong efforts to force social distancing and slow the virus's transmission. New anti-viral therapies, vaccines, and better testing will be positives. We wait anxiously for the first European country to peak and begin the downhill trek. The market watches too.

Market Volatility

I found the most enlightening view of what's going on behind the scenes in the market comes from Chamath Palihapitiya in this stunning interview on CNBC today. If you haven't already watched it, you really should do so now because it explains so much.

View attachment 523638

Regarding antibody testing for COVID 19 Palihapitiya explains it extremely well. He says the market is aching for a reason for a rally and widespread antibody testing could be the breaththrough that's needed.

Palihapitiya then really shows us the underworld of Wall Street. He says that only in bad times like this do we learn the truth of what's really going on. He says that huge hedge funds have been leveraged 10X, 11X, even higher and they're trying to unwind that leverage, which ends up causing these massive up and down whipsaw changes in the market. He says that your regular 401K investors are caught in the middle and a stock they own might fall 70% instead of 30% because of the volatility induced as these hedge funds deleverage. It's the man's hope that when the government hands out money to help businesses get through this crisis, CEOs who left their companies with vulnerable balance sheets because of stock buybacks (to artificially raise their own compensations) must pay a price, and a substantial one. He says it's absolute madness to allow these hedge funds to run with such leverage. It's like giving a baby a loaded gun.

After hearing about the degree of leverage of these hedge funds, I better understand what has been happening to TSLA's stock price on certain days. How about yesterday when TSLA dropped 16% to 361 when the market was down only 4%? One simply cannot explain such dips by rational and traditional reasoning. Keep those seatbelts fastened because this ride ain't smoothing out in the short run. We have both the uncertainty of the virus upsetting the market and we have a demon within the market that needs an exorcism so that this crazy volatility will be eliminated in future years.

I'll likely leave some dry powder sitting around just in case we see a day when the stock price becomes silly low. It would only do so because some overleveraged buyer has to sell, rather than wants to sell.

Fortunately, Tesla will still be a valuable company when the dust settles. In the meantime, keep yourself healthy.

About European peaking:

Italy is in trouble which is more severe than other countries for a variety of systematic and structural issues and challenges. However if we drill deeper in the data we see that since days the trend of new cases in Lombardia one of the first regions of the outbreak the new cases shrink since a while building a trend. In this link you find the data per region if you are data driven and want to understand details.

Coronavirus Italia

I am not saying its over at all but we are searching for peaking places and that Lombardia is a first one would make sense. In any case the situation will get worse in term of death toll and total cases for a while. So expect more bad news from Italy.

Despite testing is ramping in many places of the world the amount of newly positive tested cases is in relation to the larger amount of people tested decreasing. Thats an overlooked fact Elon pointed out yesterday in a tweet. Elon Musk on Twitter

Germany remains a positive outlier in death rate over time now at 0.28% and not growing much despite new cases grow significantly.

I don't want to downplay anything but the true death rate may be in all countries much lower (by factors) and reported versus the true cases of infected people in particular without symptoms and not known much higher.

Countries which structural vulnerability cause higher death rates indirectly. Time will tell.

The hydroxychoroquine study is declared from highest authorities (RKI, Charite) as not reliable and very badly made. The call it actually useless since testing methods are not living up to science rules e.g. the groups of people tested do not match in number, age and conditions so its apples to oranges. They mention 3 other huge misses in the study that makes it for Germany worthless combined with severe side effects the drug has. So I suggest to be careful with being too positive about it. It may work but the study does unfortunately not help at all to determine that.

 

[Papafox]

About European peaking:

Italy is in trouble which is more severe than other countries for a variety of systematic and structural issues and challenges. However if we drill deeper in the data we see that since days the trend of new cases in Lombardia one of the first regions of the outbreak the new cases shrink since a while building a trend. In this link you find the data per region if you are data driven and want to understand details.

Coronavirus Italia

I am not saying its over at all but we are searching for peaking places and that Lombardia is a first one would make sense. In any case the situation will get worse in term of death toll and total cases for a while. So expect more bad news from Italy.

Despite testing is ramping in many places of the world the amount of newly positive tested cases is in relation to the larger amount of people tested decreasing. Thats an overlooked fact Elon pointed out yesterday in a tweet. Elon Musk on Twitter

Germany remains a positive outlier in death rate over time now at 0.28% and not growing much despite new cases grow significantly.

I don't want to downplay anything but the true death rate may be in all countries much lower (by factors) and reported versus the true cases of infected people in particular without symptoms and not known much higher.

Countries which structural vulnerability cause higher death rates indirectly. Time will tell.

The hydroxychoroquine study is declared from highest authorities (RKI, Charite) as not reliable and very badly made. The call it actually useless since testing methods are not living up to science rules e.g. the groups of people tested do not match in number, age and conditions so its apples to oranges. They mention 3 other huge misses in the study that makes it for Germany worthless combined with severe side effects the drug has. So I suggest to be careful with being too positive about it. It may work but the study does unfortunately not help at all to determine that.

@avoigt thanks for the perspective. I realize the virus topic is complex enough that I will take further discussions to that thread.My aim was to lay out some of the factors I'm keeping an eye on, from an investor's standpoint.

 

[Artful Dodger]

I found the most enlightening view of what's going on behind the scenes in the market comes from Chamath Palihapitiya in this stunning interview on CNBC today. If you haven't already watched it, you really should do so now because it explains so much.

CNBC's full interview with Social Capital CEO Chamath Palihapitiya | Youtube (15:58)

Cheers!

 

[ggr]

Mod: leaving those posts but all further discussion to one of the other relevant threads please. --ggr

 

[Papafox]

This week was the biggest weekly decline for the macros since 2008, and yet there's a silver lining to the cloud because TSLA showed strength in the final half of the week and possibly may have found a bottom.

Remember that on Thursday the NASDAQ climbed 2% but TSLA climbed 18%. That strong performance by TSLA was made possible by Wednesday's big drop of TSLA and then the tenacious afternoon buying that kept TSLA above 350 despite further declines in the macros. Friday's trading was really an extension of Thursday's. TSLA ran higher in Frankfurt, topping the previous day's NASDAQ as it reached as high as the Euros equivalent of $460.

When TSLA opened this morning, enough buyers were eager to get in that we saw the stock price rise above $470 when the NASDAQ reached a small peak around 11am. Take a look below at the QQQ chart, and you'll see a slow move from moderate green in early pre-market trading to neutral in early afternoon, to noticeably red at close and even redder after hours. This movement of the NASDAQ affected TSLA, but it remained significantly above the NASDAQ all day.

Pay particular attention to the volume of 28.3M shares traded. That is a LOT of shares by TSLA standards. What this tells me is that there was plenty of selling as the over-leveraged parties were getting rid of TSLA shares but an even more enthusiastic lineup of buyers was standing by to pick up those shares. The reason for the buying, of course, is related to the bounce off 350ish on Wednesday despite downward macro pressure, which is making many former investors start getting back in.

My offhand guess is that we're looking at a trading range between 480 and 350 this week. I say this because I think the broader markets have another week of dip to go, at least. A big enough macro plunge could bust through 350, but without such a downburst, I think we remain above because there are so many buyers who wished they got in at 350ish now and they're looking for a second chance. Any dip below 350 and any climb above 480 should be reason to take notice.

In news, this was the week when we learned of the Fremont factory shutdown, effective this coming Monday. In a tweet today, Elon suggested that the auto supply chain would not have made it possible to keep the factory producing vehicles.
Positive developments:
* In this tweet, Kelvin Yang says GF3 is beginning 2 shifts next week, which should enable 3,000/wk
* In this article, Electrek says that Tesla will be using down time at Fremont to optimize production lines

The QQQ chart shows that the NASDAQ (which it emerges from) was in a slow but pretty constant decline all day.

Both the Dow and NASDAQ were down about 4% today, with the NASDAQ closing down 3.79%. TSLA's neutral close again showed considerable relative strength.

Shorts were tagged with a whopping 64.8% of TSLA selling today

Looking at the tech chart, you can see that lower bollinger band starting to level out a bit at 345. A lower bb with less slope would provide better support, but I think the psychological 350 barrier from Wednesday is likely even more important. Notice, too, the building volume with each day. TSLA right now is a battleground with some investors needing to cash out (downward pressure) and an equal number of investors ready to acquire those shares.

Mondays have been tough days during this dip, due to weekend news, so the day might be a buying opportunity.

For the week (the worst week for macros since 2008), TSLA closed at 427.53, down 119.09 from last Friday's 546.62. It was a tough week, but losses have lessened from the previous week. Better yet, 350 is standing out as a possible bottom, which is attracting buyers. Have a good and safe weekend. We're one week closer to a TSLA and COVID19 turnaround in the U.S. and Europe.

Conditions:
* Dow down 913 (4.55%)
* NASDAQ down 271 (3.79%)
* TSLA 427.53, down 0.11 (0.03%)
* TSLA volume 28.3M shares
* Oil 22.63
* Percent of TSLA selling tagged to shorts: 64.8%

 

[Papafox]

I see that NASDAQ futures are down 3.1% at the moment. Whatever happens in New York creates a magnified response by both Wall Street and the media, since both are based in N.Y. Balancing the bad news in New York (1100 new cases today) are several European countries (including Italy) that appear to have peaked and have entered the downslope. The U.S. likely has a longer run than European countries timewise before its peak because it takes a while for the virus to make its way from the coasts to more out of the way locations. For example, my younger brother is a doctor in Northern Nevada, and his large hospital has yet to handle its first COVID19 case. Other good news coming will be the massive (2 trillion dollar) stimulus package later in the week. I'm starting to think that max negativity in the markets may come right before New York peaks, rather than right before the U.S. peaks.

Here are a few thoughts for Monday:

1) Consider using the volatility to "upgrade" holdings a few at a time if you're trading from a tax free (IRA, 401K, etc.) account. During last Wednesday's dip, I bought 300 shares of TSLA at 360ish and sold 200-strike leaps a couple days later when we were trading at 460ish. One hundred shares are more valuable than one of these leaps, but I didn't have to add all that much cash to turn the leaps into shares with a 100 point gain. I'll be looking to buy shares again on Monday and sell leaps when we get a suitably high rise. This technique requires working cash. I wouldn't want to be dipping into margin with such a crazy market.

2) Be careful with put selling. If you sell a put, do so when you think we're close to a low for the day, and sell it at a price you'd be happy to buy and can afford to buy. Also, stick with a weekly put only. Puts sometimes aren't exercised until very close to expiration, and you don't want to be left wondering whether you're going to buy 100 shares or not for more than a week.

 

[Cupidchild]

1) Consider using the volatility to "upgrade" holdings a few at a time if you're trading from a tax free (IRA, 401K, etc.) account. During last Wednesday's dip, I bought 300 shares of TSLA at 360ish

Perfect timing to buy the dip. I bought it at 371.
Papafox, you should give rest of us, notification sign when its good time to buy. We all know 350 support, 315, then 280 (if it ever gets there) but I think some folks needs a nudge to remove the emotions and think about the future prospect as they buy when there is panic or capitulation in the market. Cheers and keep up the great posting.

 

[Papafox]

The chart above is QQQ because it gives us a good look at NASDAQ 100 trading before and after market hours.

As the weekend drew to an close, futures were down and most of us were expecting red ink for yet another cliffdive Monday. Alas, TSLA showed strong correlation to the NASDAQ (and QQQ) but as the afternoon wore on TSLA took on a noticeably more positive price stance than the broader markets. The Dow closed down 3.04% and the NASDAQ down 0.27%.

Notice the many climbs and dives through the red/green line for both TSLA and QQQ. To me, this says that lots of traders are playing the volatility, selling at highs and then buying the dips. I also notice that beside the big difference between the Dow and the NASDAQ, most of the stronger tech-like stocks were up today. NVIDIA and Amazon were both up more than 3%.

TSLA closing up 1.58% at 4pm, then gained in after-hours trading relative to QQQ and continued climbing beyond the chart time frame to close at about 445 by day's end, an 11 point and 2.55% after-hours gain. Not bad.

What's particularly noteworthy about this Monday's trading is what DIDN'T HAPPEN. Last Monday, 3/16, the NASDAQ dropped 12% and TSLA more than 18%. The previous Monday, 3/09, the NASDAQ dipped 7% and TSLA dropped 13.5%. What we're seeing today is a calming of the market and a realization that it may be time to start buying. Even though the Dow had a bad day of being down over 3%, strong stocks were up today, sometimes by 3%.

Although the U.S. Senate failed to pass a stimulus bill today, I believe the market remains confident it will happen in the near future. In other news, California's governor says Elon Musk Delivered 1,000 ventilators.

I am absolutely thrilled to see several European countries, especially Italy, peaking in their daily new cases charts. A lot of pain for good people but also better days lay ahead.

Shorts were tagged with 58.4% of TSLA selling today.

Looking at the tech chart, notice that TSLA continues to work its way higher after approaching 350 last week. Also notice the mild volume, which suggests that TSLA shareholders are holding for the most part and buyers are mostly waiting on the sidelines today. The after-hours run higher for TSLA generally suggests the buying fever will carry into the next trading day.

I did some light buying in the 420s today. To answer @Cupidchild 's request for buy and sell info, I can sometimes mention what I have done in the main thread in near real-time if I have a strong conviction, but it's really tough to do it with all my trades because trading from a tax-free account I can move in and out of positions quickly and do things that someone else can't. What makes sense for me might not make sense for you, and sometimes I am wrong. Maintaining this thread is time-consuming and emotionally taxing sometimes when I wake at night and wonder if the optimism I share with you will be validated by the market. For all these reasons, I am reluctant to go too far in sharing all my trades in real time. Hoping you understand.

Conditions:
* Dow down 18 (3.04%)
* NASDAQ up 6 (0.27%)
* TSLA 434.29, up 6.76 (1.58%)
* TSLA volume 16.5M shares
* Oil 24.51
* Percent of TSLA selling tagged to shorts: 58.4%

 

[Cupidchild]

@Papafox Totally understand. The Daily review of the price you are doing is tough enough.
And we need to responsible for our own trades and we all have different circumstances and opinions.
One person could be fine selling stocks TSLA is going down in price to buy back at later time, which some will just HOLD and not worry about trying catch the bottom etc..
3/18 Bottom of 350.51 could well be the ultimate bottom.. who knows.. but near terms, TSLA looks to go higher... 520+ end of the week here we come...
Trade safe and smart because we are far from being out of the woods yet..

 

[berryja]

Bravo Zulu Papa Fox, thanks for your posts and optimism. Nice to have your insight especially after loosing the braintrust pair on the investment forum.

 

[Papafox]

Our after-hours barometer did it's job of predicting a strong opening today, and the Dow climbed more than 11%, it's highest percentage gain since 1933. The NASDAQ was up 8.12%, with TSLA climbing twice that rate. Nice to have ascended above 500.

One of the reasons for TSLA's big climb compared to other stocks today was that the market this week has indeed been shopping for the best values. Both TSLA and NVDA had a 16%+ day, suggesting getting the current stock price better aligned with the actual values of these stocks. OTOH, Amazon, which should do well in this environment, only climbed less than 2%, likely due to it not falling as far previously. Thus, we're seeing a rebalancing that will benefit TSLA.

In after hours trading, TSLA climbed quite a bit more than you see in the chart but then lost ground and finished around 510. Such a dip in later after-hours trading may be reflected in Wednesday's opening.

Much of the climbing today occurred as the market anticipates passage of a large stimulus bill. The POTUS has also been touting a reopening of America by Easter. Watching the ticker during that press conference, I could see that when he pushed the idea of the reopening but didn't give solid explanations what steps would be taken to do so safely, the market dipped a bit. No doubt his people noticed this relationship as well and I hope the point is made that investors want workable solutions that will put the CV crisis on a downward trajectory and not allow a reversal. In the Coronavirus thread, there was substantial talk about the need for masks and significantly more testing capabilities before the country goes full speed ahead.

There's room for optimism with TSLA in the longer term and that optimism has been reflected in the stock price. This post by @jbcarioca does a nice job of summarizing the positives.

TSLA was fairly closely aligned with the QQQ chart above today, but TSLA took a shallower dip at 2pm

What might the hedge funds (which were heavily leveraged last week) have in mind for TSLA this Friday? Looking at the Opricot max pain chart, you can see over 6K of 480, 490, and 500 calls expiring. Therefore, we can expect some downward pressure by the funds in the second half of the week as they try to see TSLA end the week below 480.

Meanwhile, what has Shorty been up to? Dusaniwsky's chart above show net shorting taking place since about Feb25. Please take these numbers with a grain of salt because we've seen some big errors in the past. Nonetheless, if Shorty has been selling back into more positions lately, we can realize that the recent recovery has been DESPITE the additional short-selling. That short-selling may also help explain the higher percent of selling by shorts number we've been seeing during the past four trading sessions.

TSLA shorts were tagged with 60.4% of selling on Tuesday

Looking at the tech chart, you can see the start of a V-shaped recovery (don't hold your breath quite yet, however). Also, notice the somewhat subdued volume for this big a jump.

On a personal note, I'm looking for an opportunity to sell one 200-strike leap in the 500s to balance the 100 shares I bought at 420 yesterday. I see today's climb as a setup for a local high tomorrow. When the next dip comes, I buy 100 or 200 shares and wait for sufficient rise to justify selling 1 or 2 200-strike leaps for another rebalancing when the stock price is sufficiently high again.

Where does TSLA go from here? In the short run, when the stimulus package is passed, we could see a short-term bump up. We could also see a pretty immediate sell the news. With all the CV troubles in New York and soon to be in Florida (with its very senior population), I think we see lumpiness continue as a dip transpires on the bad news sometime in the next week and a half. A climb from that dip could be a much greater climb, however. Much depends on how bad the New York situation gets. I have a contact in a New York hospital right now who says equipment is adequate at the moment, but the big influx of cases is still to come and it'll probably get ugly. As an investor, you need to watch New York carefully right now.

Conditions:
* Dow up 2113 (11.37%)
* NASDAQ up 557 (8.12%)
* TSLA 505.00, up 70.71 (16.28%)
* TSLA volume 22.9M shares
* Oil 24.97
* Percent of TSLA selling tagged to shorts: 60.4%

 

[Papafox]

Today, TSLA was amazingly strong relative to the rest of the market. Notice the "head fake" shortly before 10am when TSLA suggested it was going to do a big sell-off and then abruptly reversed course about the time the macros did.

QQQ, charted above, is a composite of top NASDAQ companies

Today was day two of TSLA's pre-stimulus bill runup. Yesterday's rise of TSLA was influenced by two main factors: 1) NASDAQ up 8% and 2) investors redistributing their money to find better stocks, leading to both TSLA and NVDA being up 16%

Today, NASDAQ was actually down 0.5%, TSLA closed up 6.78%, and NVDA was down 1.4%. What happened? I think the redistribution of assets continues, with TSLA looking favorable and NVDA no longer looking so special. News about Tesla was light today, but positive. Tesla is working with ventilator company Medtronic so it can produce one of the ventilators.

As for the "sell the news" event, even though the Dems and Repubs have basically agreed on a stimulus bill, there are loose ends and so perhaps the official start of the "sell the news" phenomenon is somewhat on hold until the bill actually gets signed.

Another factor to consider is the tweet below. It's amazing that all three of these crashes turned around when down 34-35% and then we saw a 2 day rise of 17-26%. Skeptics call such a bounce a "dead cat bounce" because it is a brief period of positive trading after a massive dip.
Andy Zaky's Tweet today

Additionally, Pierre Ferragu's Tweet yesterday mentions a 15X P/E ratio at S&P500 companies at present, which is much higher than the 8X P/E after the 2008 crash. His point is that these stocks could still fall further. A more positive interpretation could be that there's still room for more redistribution of investor money towards companies such a Tesla as other companies are still relatively expensive compared to their earnings.

Factors suggesting stocks could still drift lower:
* Perhaps we just saw our dead-cat bounce
* "Sell the news" following stimulus bill may happen
* New York CV19 situation is going to get much worse before it bottoms out, and both Wall Street and national media are based there
* Employment numbers released Thursday AM
* Hedge funds have incentive to push TSLA below 500 on Friday (but may lack the horsepower)

Factors favoring TSLA stock price strength:
* Redistribution from other stocks to TSLA happened today. There may be more ahead
* TSLA is looking strong for the future and investors may not be willing to sell and then risk having to get back in at a higher price
* The price 350 was so successfully defended last week that many believe that will be the low of this dip and such expectations could drive substantial buying if the price ever again approached 350
* The number of investors who would like to get back into TSLA outnumbers the available shares when price is compromised

Shorts were tagged with 61.7% of TSLA selling today

Looking at the tech chart, the V-shaped recovery continues (and I remain skeptical that there won't be another dip before long)

On a personal note, not long after open today when the stock price peaked, I sold 2 leaps around 540 in order to close the short-term trade I started Monday at 420 and to set up another short-term trade with an expected purchase price below 540. Obviously, I wish I had sold later in the day at 550, but the stock price drop was so rapid I felt that the "sell the news" phenomenon had begun. Yep, I fell for the market head-fake. Keep in mind that I have more TSLA exposure now than I did on the way down and that I'm over 90% invested in where I want to be for the recovery. My short-term plays often create value, but they're such a small percentage of my shares and options that they don't harm me much when TSLA moves higher.

Conditions:
* Dow up 496 (2.39%)
* NASDAQ down 34 (0.45%)
* TSLA 539.25, up 34.25 (6.78%)
* TSLA volume 20.8M shares
* Oil 24.4
* Percent of TSLA selling tagged to shorts: 61.7%

 

[Papafox]

I'll place discussion below both charts (TSLA & QQQ) so they're easier to compare.

QQQ had a solidly strong day with a strong ending. NASDAQ closed up 5.60%

Judging by the magnitude of the pre-market dip that TSLA experienced, it's safe to assume that someone was busy manipulating the stock to reach a desired outcome by Friday's close. There simply was no news to justify this extreme negativity relative to the NASDAQ. A story appeared that 2 Tesla employees working from home had COVID19, but that's pretty much a foregone conclusion for a company with thousands of employees in the San Francisco Bay Area. When QQQ bottomed out at 8:15am, it was down not quite 2%, but TSLA's bottom around 8:30am was over 4% down from yesterday's close. Both charts rose into the green prior to open, but after 10am the hedge funds went to work on TSLA and managed to push it to the red/green line by 10:50am. From here we saw a game of whack-the-mole to keep TSLA in the red. Slightly after noon, TSLA began the dip that would push it below 520, where capping took place to keep it down for nearly 1 1/2 hours. With about 40 minutes left in market trading, buyers pulled TSLA up to 525ish, hedge funds cranked up the selling and pushed it down to 518ish, but in the final 10 minutes as macros shot higher, buyers again regained control and up she went to 527.

Notice the taletell icicles of manipulations. TSLA's chart definitely looks like the Kansas sky during tornado season.

As I mentioned earlier this week, the existence of lots of 480, 490, and 500-strike calls expiring on Friday is the incentive for this end of week push. Overall, it was a very successful manipulation. I won't be surprised if Friday sees additional downward pressure, regardless of macros. Someone very badly wants TSLA lower by Friday close. This country lacks an SEC with the desire to police this type of abuse, and so it continues.

Shorts were tagged with 61.6% of TSLA selling on Thursday

If the macros are red tomorrow, maybe the hedge funds will succeed in reaching 480, but without help from the macros, that looks like too great a drop to pull off.

In the bigger picture, Neal Ferguson of the Imperial College in UK today vastly decreased his estimated death count in UK and said he believes existing hospitals should be able to handle the pandemic. He did say that efforts such as social distancing must continue. More studies are showing a relationship between warm temperature and more difficult transmission of the virus, and small studies continue to support the theory that the right chloroquine treatment is a substantial help to COVID19 patients. None of these discoveries will matter on Friday, however, so keep the seatbelts snugged for more manipulations. The bad news is that there's still a significant shortage of testing supplies, masks, PPEs in Western Nations. The good news is that with the right precautions taken by countries, this pandemic may peak earlier than some had been expecting. Major announcements of bad or good news can come at any time, so please don't be positioned too far from your desired holdings for short-term timing of the market because the picture is evolving very quickly right now.

Conditions:
* Dow up 1352 (6.38%)
* NASDAQ up 413 (5.60%)
* TSLA 528.16, down 11.09 (2.06%)
* TSLA volume 17.22M shares
* Oil 23.28
* Percent of TSLA selling tagged to shorts: 61.6%

 

[Cupidchild]

So with how fast things are changing, is your bottom ladder buying price being altered?
e.g.:
470 @ 33% buy
420 @ 33% buy
370 @ 33% buy