TSLA daily chart above
QQQ daily chart above
In pre-market trading Friday, we saw TSLA reach 530 before losing ground. Since I believe that various parties had been manipulating TSLA for several days to set it up for a low Friday options close (and setting themselves up with sold calls, purchased puts, or shares sold short), it was not surprising to see a manipulated response to the big rise in Thursday's after-hours trading. Quite simply, the manipulation itself on a Friday push-down can be very lucrative (excluding one's existing positions) if one starts shorting the stock near the top and then sees a market response to continue the downtrend (which is what I think happened).
As with many recent manipulations, we saw a decline start in the low-volume pre-market environment to set expectations of what would transpire once the market opened. When the market opened, TSLA was trading just a shade under 510, and 13 minutes later it was approaching 493, a dip of some $17. That's a rate of decline of more than $1 per minute. High volume of trading was needed to counteract buying generated by the good news of Tesla's 88.4K delivery numbers.
Once the downtrend became established during market hours, the decline became self-perpetuating for the most part as:
1) macros started dipping quickly around 10:15am
2) traders began selling on recognition of a local high already having been reached, with plans to rebuy later
3) legitimate longs took some money off the table in recognition that the next week to two weeks will be a tough time for the virus news in the United States
Looking at the TSLA daily chart, you can see reversals where the stock tried to climb. Look at the volume that follows and you'll see a pick up in the volume to reestablish the downtrend. I believe this is manipulators managing the trend to keep it on track.
After the macros bottomed out around 2pm, TSLA did too and recovered about $10 before end of day. Notice the very significant recovery of QQQ in the final 15 minutes of the day and notice how this recovery was not reflected in TSLA trading but volume increased with TSLA instead. I think the volume increase was due to hedge funds and market makers selling to cap the TSLA rise into close.
Looking at predictions of production and deliveries, Rob Maurer of Tesla Daily came extremely close on both. Here's a tweet to Rob from Troy Teslike, congratulating him on his accuracy. We'll need to give Rob's estimates a serious look in future quarters.
TSLA shorts were tagged with 59.4% of selling today, continuing the trend of likely high manipulations
Looking at the tech chart, notice the robust recovery of the lower bollinger band. We'd like to see it rise to the 200 day moving average line to help define a nice support point in case the macros do something funky during the next week to two weeks.
Make no mistake, Q1 P&D report numbers were very encouraging. They showed that TSLA was on track for an excellent quarter if not for the disruptions during the final half of March. The implication is that before Covid-19 hit, Tesla showed that Q1 of 2019 was an anomaly, and that even the historically slow Q1 of an automaker's year, one without help from U.S. subsidies, could be robust and profitable.
Moreover, analysts plugged the production and delivery numbers into their speadsheets and
some, such as Deutsche Bank, are now predicting a small profit for Tesla in Q1. What's the implication of a possible profit announced by Tesla in late April? I would say it will help TSLA fight the downward forces we may see in the macro world until the daily deaths in New York have bottomed out and are improving. This significant pain in New York is a "lump" I've been predicting all along. Because of the chance of a profit, many investors will want to be holding shares and call options when the Q1 ER occurs. Consider, too, this
Tesla is Crushing the Auto Industry post by Gene Munster. He is showing that Tesla's demand has been increasing compared to competitors and on so many metrics Tesla keeps pulling farther ahead than other auto makers. For these reasons, I think the short-term safety net under TSLA has been strengthened.
Monday may be free from the ferocious pressure of manipulators on a Friday, and so if the macros are up we might see a chance for the stock to recover some of Friday's dip.
For the week, TSLA closed at 480.01, down 34.35 from last week's 514.36. That's a 6.7% dip for the week compared to the NASDAQ's 1.7% dip in a week with overall good news for Tesla. Hmm.
Conditions:
* Dow down 361 (1.69%)
* NASDAQ down 114 (1.53%)
* TSLA 480.01, up 25.54 (5.62%)
* TSLA volume 22.2M shares
* Oil 28.34
* Percent of TSLA selling tagged to shorts: 59.4%
The Big Picture
We're now heading into the "max pain" week or two for New York's exposure to Covid-19. So far reports from New York indicate hospitals are able to handle the inflow and we have not run out of ventilators so far. Knock on wood; the type of situation we saw in Italy with the volume of infected overwhelming the health care system has so far been avoided. I believe the market will give a sigh of relief once the daily deaths in New York peaks.
I'm not dismissing the challenges ahead, but I see reasons for a better recovery than some expect. Here's why.
Once the U.S. has seen a light at the end of the tunnel in New York, the next question is: How long will this pandemic run? Some are predicting up to four cycles of the virus in the U.S. with longtime effect on the economy. I take a more optimistic view. At one point, pessimists in New York saw a cap on New York's ability to expand business because the horse manure on the streets would get so deep the streets would become unusable for travel. We know that point never arrived because technology stepped in and with the introduction of the automobile the horse manure problem went away. I see similar help from technology as America mobilizes its entrepreneurs and addresses the Covid-19 problem. Consider this progression:
* Masks and PPEs for healthcare providers will be manufactured from new sources and an adequate number will be made available
* Available Covid-19 tests will increase dramatically as new companies are approved by the FDA
* Sufficiently-accurate antibody tests will become available. Antibody tests are important because:
a) they will help us understand what portion of the population out there has already had the virus
b) they will identify individuals who have already had the virus who can then
1- donate plasma with their antibodies to greatly enhance the chances of survival for patients with most severe cases
2- return to work and whether in health care of elsewhere these people can be put in positions of maximum interaction with others and safely perform their duties
* April is the month when we start to see large double-blind studies of therapeudics such as Remdesivir and Hydroxychloroquine released. Many doctors are not using these potentially helpful drugs because there are restrictions on how they can be used, and those restrictions are related to a lack of carefully conducted tests. Once one or more of these drugs is shown to be both safe and effective for treatment, use of the drugs will increase and (provided there's significant benefit) fewer patients will require hospitalization and ventilators, fewer will die, and those treated should recover sooner (which not only helps them but also helps prevent transmission of the disease).
* Seasonal viruses such as the flu are adversely affected by temperature. This is why flues typically fade away during summer. Some data so far suggests coronavirus will also be adversely-affected by higher summer temperatures, giving the Northern Hemisphere's inhabitants a nice break from the virus's ability to quickly spread.
* Additional therapeudics such as one for killing head lice and another for treating pancreatitis may show promise on Covid-19. Investigations are underway now.
* Artificially-created antibodies have already been sent to the military for testing. These engineered antibodies for Covid-19 could become available for use as early as this summer. They last up to 8 weeks, initially could protect our healthcare workers, but could be expanded if deemed safe and effective to allow employees to return safely back to work.
* Several vaccines have already been created, with at least one or two already in human trials. Although the trials time is normally 12-18 months, don't be surprised to see efforts to expedite these vaccines during the Covid-19 crisis.
Thus, from all these advancements, I see the Covid-19 picture continuing to improve and with each major step forward the market will become more comfortable with starting to look beyond the crisis.
Have a great weekend and continue to stay safe. Better days lay ahead. Below I include a photo I took this morning at sunrise.
