Thoughts on current price movements and an unlikely Perfect Storm
I'm bullish on what I've seen from TSLA this past week but I have some hesitancy/unclarity regarding the overall market that adds some risk. But overall, even on the downside (if the market really takes a dive) we've got strong price support at 142, 138 and then 133. Personally I don't see it breaking under 142 unless we've got some very major dumping (as a result of a big market scare or downtrend). As long as the markets are reasonably resilient, I think TSLA appears to be consolidating and preparing for to make a run into the 150s.
So far in the 140s, it's showing that there are buyers (not just traders, but it appears funds/institutions are purchasing as well due to strong price support at various levels in the 140s). Again, I'm not buying into the theory that volatility is over for TSLA, so I'm expecting high volatility still. It might be choppy if the markets are a mess. But if markets are stable and TSLA makes a move into the 150s, we could see a rapid rise. 150 was the level where we saw a big breakdown, so if it can get over 150 (ie., 151 or so) it's likely buyers will start to chase the stock and traders will fuel the momentum. Next target will be breaking the ATH of 158 which might be tough because buyers who bought at that level will be tempted to sell to recoup losses. But if it's able to break 158 (which could take some time in the 150s), then we're looking at the 160s and new all-time highs.
I don't want to discount the overall market risks. So, if the market tanks and takes down TSLA with it, then I'm (personally) hoping that it will present some interesting buying opportunities. The best buying opportunities in the past few months IMO have happened when TSLA downward price movements broke the charts. What I mean is that the downward price movements were so drastic (ie., below the 20 day moving average) that traders no longer saw TSLA in an uptrend (though for the Goldman dip it was brief). During those times, options premiums tank because traders aren't interested and people are scared that there's no bottom for TSLA. IMO, TSLA in the 120s breaks the charts. Traders can no longer claim TSLA is in an uptrend, they reverse their positions and view of the stock. At a certain point, major funds (ie., Contrafund, Price T Rowe, etc) and long-term believers step in and step up the bottom... providing a bottom and a reversal to the price massacre. I'll be one of those buyers, buying a ton of LEAPs. Then, TSLA starts its rebound and before you know it (though it could take a bit) we're hitting new ATHs. This is the scenario I salivate over (ok, just kidding, kind of). And this is the situation I'm constantly ready for. But I'm not counting on it. TSLA has shown just too much strength in this recent recovery from it's correction and touch of 135. My theory when it hit the 130s was that buying support in the 130s was just too strong and we wouldn't see the 130s for long. So far, that's been the case. Of course this could change if the markets turn very frightening and it scares away TSLA buying support in the 130s. But again, as much as I'd love for that to happen I'm not expecting it (though I'm prepared for it).
That being said, I don't think anyone can confidently "predict" today's or tomorrow's or the day-after's price movements. There are just too many factors (ie., overall markets, who's buying TSLA at what time of day, who's shorting, etc). We don't have all the facts (in fact nobody does). Thus, everything is about odds. Even looking at market futures, just gives you some more info on where the market might open but during the course of the day so many things can change. You can have odds on what you think the price will do tomorrow, but in reality it's only a guess with certain odds attached. At certain times, our odds can be higher because we have higher confidence based on certain things we know. And those are times that give us an investment opportunity (whether short-term or long-term) but it's an opportunity still with risk attached.
That being said, my current plan of action for my short-term trading strategy is to continue holding my Sep13 150s (purchased when stock was $138) but of course this could change at anytime (depending on a bunch of factors, especially if I become super bearish on the markets and that changes my risk-reward equation). I'm currently not hedging or doing a bull call spread because I want to go with my original investment thesis for this trade that volatility is alive and well and we'll see new ATH's sooner than later. When the stock reaches new ATH's and appears to be topping, I'll attempt to sell my calls and probably reverse my position. All of this is still done with a relatively small % of my overall holdings so I'm okay with the losses if they come. But I also want to see if I can take advantage of the volatile/violent price swings we're facing. My current theory is that chasing buyers and momo traders will take this stock to new ATHs (timing depending on overall market conditions), and at some time buyers will dry up and traders will reverse their position and we'll see another correction fueled by uncertainty, doubt and fear (the extent though depends on various factors like how deep and pervasive the fear is). Buying on the correction will always pose certain risks because there's always the possibility of the stock going lower or breaking through another price support barrier and hitting new lows. But if somehow you can time it right (which is difficult and requires a lot of accuracy, and even at that there's still a lot of risk cause each dip can look different), I think there could be some opportunities for gain.
Personally though I'm unclear how many crazy buying opportunities there will be under the $200 price level. To me $135 was a good buying opportunity but it didn't "break" the charts and wasn't crazy. To me, the Goldman dip was a crazy buying opportunity under $110. I'm hoping for at least one or two more crazy "chart-breaking" buying opportunities under $200 though there's no way to be certain about if and when this will occur. I'm thinking one possible but unlikely scenario in the next 6 months is if we see a significant downtrend in the market (ie., not just a minor correction, but an uptrend reversal) that takes down the market 20% from it's ATHs (ie., SPY down to low 140s, Dow under 13000). A downtrend of that level could likely sink TSLA into a downtrend as well (as well as other leaders) and we could see some great buying opportunities (ie., low option premiums). The problem will be most people will be too scared to do major buying (for fear of things going a lot lower). And since we're human, we'll likely be influenced by the fear of others and will be timid. So, if the Dow tanks under 13000 within the next 6 months, please PM me and let me know not to be scared and to "do what I need to do." At that time, I'll likely convert a significant % of my core stock position to LEAPs (especially because in November most of my stock holdings will be over a year old and will be subject to long-term capital gains tax). If this unlikely scenario actually does unfold, I just wish it happens after Nov 11th. Nov 11th is when they release Jan 2016 LEAPs for TSLA. What the heck, if it's a perfect storm (SPY in low 140s, DOW under 13000, 2016 LEAPs available, and TSLA at 110-140), then I might just do a Snipus (see ongba's AAPL investor pdf) and convert all my stock to 2016 LEAPs. And I hate to say it but I might even need to stay away from TMC and other places during that time because I might get influenced by those in fear. We'll all be licking our wounds at that time and counting our losses. But hopefully, I'll be able to find the clarity, wisdom and courage to make some bold moves. Maybe we should just decide right now... if we have a perfect storm in the next 6 months (SPY in low 140s, DOW under 13000, 2016 LEAPs available, and TSLA at 110-140), then who's in to make some bold moves? Um, forget it. I don't want to pump this up and I don't want to get into the mistake of influencing others' investment decisions in this manner. We all need to decide what to do own our own because all of our circumstances are very different. I'll just leave it at that.
On a side note, Yahoo Finance updated their major holders page for TSLA (
TSLA Major Holders | Tesla Motors, Inc. Stock - Yahoo! Finance). Institutional support (as of 6/30/13) remains strong with funds/institutions holding 68% of the shares (and 106% of the float). It's natural for some funds to trim or liquidate their positions, and for other funds to increase their holdings or for new funds to join the ranks. Price T Rowe Growth Fund was a major new buyer in Q2 (purchasing 2.6m shares). Fidelity's Contrafund upped their holding from 1.97m shares in Q1 to 3.13m shares in Q2. IMO strong institutional support and buying is one of the key reasons for the strong stock price rise from 100 to our current levels. Without the strong institutional support I think the dips could be much more exaggerated as traders pound the stock down and retail investors stay on the sidelines out of fear. It's the institutions that step in and keep the stock from falling to ridiculously low levels (though this might happen in the future if things change).
I dipped my toe in a little bit today after hours, timed it pretty well and at this point missed the low point by .17. If this thing does dip, and I have no idea if it will, I will be loading up as much as I can which may include a leap or two.
