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TSLA Market Action: 2018 Investor Roundtable

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#23,441
Fact Checking said:
Noticed something interesting/odd about yesterday's (2018.08.06) price action:
  • By historical standard volatility was average at $13.16, with a $354.98 top and a $341.82 bottom, but it represented a significant intraday drop of about 3.7% after a strong rise, and the closing price ($341.99) was very close to the bottom.
  • At the same time, despite the significant drop, 'short volume' metrics are showing a significant drop in shorting activity, such as Volumebot. These 'shorting volume' metrics have limitations in that they only capture about 50% of all transactions, but I believe they are showing 'broad-based short activity sentiment' by retail shorts pretty accurately. The drop suggests that there was a significant drop in short sentiment over the weekend, from over 50% to 30% - near record low levels.
  • The FUD tide is turning and turned some more over the weekend, and Spiegel's TV interview should convince any rational shorts left that he's leading a lost cause: you could smell his fear and anger in the interview, by putting all his money into 2020 January PUT options when TSLA was at around $350 he realized a big loss and leveraged his bet like TT007 often dreams of doing, but the Q2 report effectively trapped him in that position with a quickly depreciating asset. Spiegel should be pretty close to having turned a ~$10m fund into a <$1m fund by shorting Tesla.
  • The price action over the day was brutal: early in the day TSLA started with a strong rise, but then a very significant break-out on NASDAQ that would normally have resulted in a $5-$10 rise by TSLA was not followed through - significant amounts of liquidity at around $355 (last week's peak and now major line of resistance) consumed all the buying activity of around 1 million shares.
  • The pattern of selling over the day was almost non-stop, and it had very similar pattern of first consuming liquidity at key levels with what appeared to be LIMIT orders, and then 'punching through' the relatively thin book via pressure-selling via MARKET orders - just enough to trigger stops and trailing stops, and patiently working down the price during the day. The pattern had the appearance of a single big player and must have cost at least 1 million shares. Most of the liquidity was soaked up using LIMIT orders - which explains the Volumebot drop in short interest (which would not interpret a LIMIT order as initiator of a short position I believe).

I.e. yesterday's price action was distinctly at odds with what Volumebot is telling us about 'short sentiment'.

Speculation:
  • At this point I find it unlikely that any of the big short players has this much dry firepower available, and even if they had shares available to sell I believe they'd try to time it with Tesla-negative news like they did it in the past. Yesterday's price action on the other hand was done with very little genuine news other than the 10-Q of the Q2 report, which contained mostly positive news and reiteration of positive news.
  • But who has a lot of shares available to work the price like this? Major holders of 5+ million shares with a bullish view of the company: they know that there's almost zero risk in reducing the price temporarily, as the stock is undervalued.
  • So my working hypothesis is that what we saw yesterday was either a market maker de-risking some big options win caused by the big gap up, or an attempt to walk back the price a bit by one of the big funds long in TSLA, either to accumulate more shares at lower price levels through stop-hunting, or to earn a lot of shares this Friday through options:
    • Note that the options chain for this Friday does not seem to have anything weird in it though.
    • But if it was a market maker de-risking then the aggressive stopping at $355 and the aggressive drop at the end of the day makes little sense: they'd have until Friday to fix their book, and they'd want the price to stay high. So they'd de-risk mostly by trimming the tops a bit but not breaking down the price - there's 4 long trading days left until Friday.
    • I'd discount owners of the 2019 March notes and the $360 conversion price as culprits: while $920m is a lot of money, it's just 2.5 million shares of TSLA and probably distributed pretty diversely, in 100m or so chunks - which only represent a couple of hundred thousand shares ownership interest (if any). Enough to probably de-risk via a short position once price goes through $360 decisively, but probably not enough of a stake to have an interest in setting the price aggressively.
    • Since yesterday's price action probably consumed a net amount of shares, and the selling near the end of the day was aggressive, the primary goal must be even lower price levels, to shake out weaker longs or to set the stage for options-Friday.
    • Another possibility is a big options market-maker being on the wrong side of many CALL options - but I have trouble believing that a big bank would just let that happen.
    • And yes, this could still be consistent with a big short seller increasing position size, regardless of the cost.
Anyway, I could be totally wrong about this though, what do you guys think about yesterday's price action? It looked distinctly odd to me.
Click to expand...

I am of the opinion that it was profit taking.
 
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#23,444
Fact Checking said:
Noticed something interesting/odd about yesterday's (2018.08.06) price action:
  • By historical standard volatility was average at $13.16, with a $354.98 top and a $341.82 bottom, but it represented a significant intraday drop of about 3.7% after a strong rise, and the closing price ($341.99) was very close to the bottom.
  • At the same time, despite the significant drop, 'short volume' metrics are showing a significant drop in shorting activity, such as Volumebot. These 'shorting volume' metrics have limitations in that they only capture about 50% of all transactions, but I believe they are showing 'broad-based short activity sentiment' by retail shorts pretty accurately. The drop suggests that there was a significant drop in short sentiment over the weekend, from over 50% to 30% - near record low levels.
  • The FUD tide is turning and turned some more over the weekend, and Spiegel's TV interview should convince any rational shorts left that he's leading a lost cause: you could smell his fear and anger in the interview, by putting all his money into 2020 January PUT options when TSLA was at around $350 he realized a big loss and leveraged his bet like TT007 often dreams of doing, but the Q2 report effectively trapped him in that position with a quickly depreciating asset. Spiegel should be pretty close to having turned a ~$10m fund into a <$1m fund by shorting Tesla.
  • The price action over the day was brutal: early in the day TSLA started with a strong rise, but then a very significant break-out on NASDAQ that would normally have resulted in a $5-$10 rise by TSLA was not followed through - significant amounts of liquidity at around $355 (last week's peak and now major line of resistance) consumed all the buying activity of around 1 million shares.
  • The pattern of selling over the day was almost non-stop, and it had very similar pattern of first consuming liquidity at key levels with what appeared to be LIMIT orders, and then 'punching through' the relatively thin book via pressure-selling via MARKET orders - just enough to trigger stops and trailing stops, and patiently working down the price during the day. The pattern had the appearance of a single big player and must have cost at least 1 million shares. Most of the liquidity was soaked up using LIMIT orders - which explains the Volumebot drop in short interest (which would not interpret a LIMIT order as initiator of a short position I believe).

I.e. yesterday's price action was distinctly at odds with what Volumebot is telling us about 'short sentiment'.

Speculation:
  • At this point I find it unlikely that any of the big short players has this much dry firepower available, and even if they had shares available to sell I believe they'd try to time it with Tesla-negative news like they did it in the past. Yesterday's price action on the other hand was done with very little genuine news other than the 10-Q of the Q2 report, which contained mostly positive news and reiteration of positive news.
  • But who has a lot of shares available to work the price like this? Major holders of 5+ million shares with a bullish view of the company: they know that there's almost zero risk in reducing the price temporarily, as the stock is undervalued.
  • So my working hypothesis is that what we saw yesterday was either a market maker de-risking some big options win caused by the big gap up, or an attempt to walk back the price a bit by one of the big funds long in TSLA, either to accumulate more shares at lower price levels through stop-hunting, or to earn a lot of shares this Friday through options:
    • Note that the options chain for this Friday does not seem to have anything weird in it though.
    • But if it was a market maker de-risking then the aggressive stopping at $355 and the aggressive drop at the end of the day makes little sense: they'd have until Friday to fix their book, and they'd want the price to stay high. So they'd de-risk mostly by trimming the tops a bit but not breaking down the price - there's 4 long trading days left until Friday.
    • I'd discount owners of the 2019 March notes and the $360 conversion price as culprits: while $920m is a lot of money, it's just 2.5 million shares of TSLA and probably distributed pretty diversely, in 100m or so chunks - which only represent a couple of hundred thousand shares ownership interest (if any). Enough to probably de-risk via a short position once price goes through $360 decisively, but probably not enough of a stake to have an interest in setting the price aggressively.
    • Since yesterday's price action probably consumed a net amount of shares, and the selling near the end of the day was aggressive, the primary goal must be even lower price levels, to shake out weaker longs or to set the stage for options-Friday.
    • Another possibility is a big options market-maker being on the wrong side of many CALL options - but I have trouble believing that a big bank would just let that happen.
    • And yes, this could still be consistent with a big short seller increasing position size, regardless of the cost.
Anyway, I could be totally wrong about this though, what do you guys think about yesterday's price action? It looked distinctly odd to me.
Click to expand...
Trying to apply logic or formulas to TSLA is an exercise in futility.
 
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#23,447
Fact Checking said:
Noticed something interesting/odd about yesterday's (2018.08.06) price action:
  • By historical standard volatility was average at $13.16, with a $354.98 top and a $341.82 bottom, but it represented a significant intraday drop of about 3.7% after a strong rise, and the closing price ($341.99) was very close to the bottom.
  • At the same time, despite the significant drop, 'short volume' metrics are showing a significant drop in shorting activity, such as Volumebot. These 'shorting volume' metrics have limitations in that they only capture about 50% of all transactions, but I believe they are showing 'broad-based short activity sentiment' by retail shorts pretty accurately. The drop suggests that there was a significant drop in short sentiment over the weekend, from over 50% to 30% - near record low levels.
  • The FUD tide is turning and turned some more over the weekend, and Spiegel's TV interview should convince any rational shorts left that he's leading a lost cause: you could smell his fear and anger in the interview, by putting all his money into 2020 January PUT options when TSLA was at around $350 he realized a big loss and leveraged his bet like TT007 often dreams of doing, but the Q2 report effectively trapped him in that position with a quickly depreciating asset. Spiegel should be pretty close to having turned a ~$10m fund into a <$1m fund by shorting Tesla.
  • The price action over the day was brutal: early in the day TSLA started with a strong rise, but then a very significant break-out on NASDAQ that would normally have resulted in a $5-$10 rise by TSLA was not followed through - significant amounts of liquidity at around $355 (last week's peak and now major line of resistance) consumed all the buying activity of around 1 million shares.
  • The pattern of selling over the day was almost non-stop, and it had very similar pattern of first consuming liquidity at key levels with what appeared to be LIMIT orders, and then 'punching through' the relatively thin book via pressure-selling via MARKET orders - just enough to trigger stops and trailing stops, and patiently working down the price during the day. The pattern had the appearance of a single big player and must have cost at least 1 million shares. Most of the liquidity was soaked up using LIMIT orders - which explains the Volumebot drop in short interest (which would not interpret a LIMIT order as initiator of a short position I believe).

I.e. yesterday's price action was distinctly at odds with what Volumebot is telling us about 'short sentiment'.

Speculation:
  • At this point I find it unlikely that any of the big short players has this much dry firepower available, and even if they had shares available to sell I believe they'd try to time it with Tesla-negative news like they did it in the past. Yesterday's price action on the other hand was done with very little genuine news other than the 10-Q of the Q2 report, which contained mostly positive news and reiteration of positive news.
  • But who has a lot of shares available to work the price like this? Major holders of 5+ million shares with a bullish view of the company: they know that there's almost zero risk in reducing the price temporarily, as the stock is undervalued.
  • So my working hypothesis is that what we saw yesterday was either a market maker de-risking some big options win caused by the big gap up, or an attempt to walk back the price a bit by one of the big funds long in TSLA, either to accumulate more shares at lower price levels through stop-hunting, or to earn a lot of shares this Friday through options:
    • Note that the options chain for this Friday does not seem to have anything weird in it though.
    • But if it was a market maker de-risking then the aggressive stopping at $355 and the aggressive drop at the end of the day makes little sense: they'd have until Friday to fix their book, and they'd want the price to stay high. So they'd de-risk mostly by trimming the tops a bit but not breaking down the price - there's 4 long trading days left until Friday.
    • I'd discount owners of the 2019 March notes and the $360 conversion price as culprits: while $920m is a lot of money, it's just 2.5 million shares of TSLA and probably distributed pretty diversely, in 100m or so chunks - which only represent a couple of hundred thousand shares ownership interest (if any). Enough to probably de-risk via a short position once price goes through $360 decisively, but probably not enough of a stake to have an interest in setting the price aggressively.
    • Since yesterday's price action probably consumed a net amount of shares, and the selling near the end of the day was aggressive, the primary goal must be even lower price levels, to shake out weaker longs or to set the stage for options-Friday.
    • Another possibility is a big options market-maker being on the wrong side of many CALL options - but I have trouble believing that a big bank would just let that happen.
    • And yes, this could still be consistent with a big short seller increasing position size, regardless of the cost.
Anyway, I could be totally wrong about this though, what do you guys think about yesterday's price action? It looked distinctly odd to me.
Click to expand...
Great post. The trading was odd and this makes a lot of sense in hindsight. What stood out the most was the late quite aggressive selling in the lower volume last hour of trading. The stock was trading virtually horizontally after the early rise and fall back. I found the horizontal trading quite unusual too, but it seemed to fit a lower volume consolidation kind of day. The end of the day was anything but that. As I understand it, there isn't much support under TSLA until $330ish, so my feeling was that this was an attempt to reverse the short term trend in an effort to create a significant dip. Since the stock closed under the low of day from Friday, I think it is set up to potentially drop firmly this morning with the typical morning selling, assuming shorts have the funds/shares to do so. Short traders may also jump on this intraday drop below Friday's LOD. I've still got quite a few September calls that I was hoping to hang onto for another couple of weeks, but I'm concerned we could easily end up back around $330. On the other hand, if the morning dip today gets bought, this little dip could be negated.
 
#23,453
bdy0627 said:
Totally agree. Painful interview to watch given Spiegel's obvious desperation level for the stock to go down. Keep in mind, he (and many of the shorts) doesn't think there actually is much demand left for the model 3, so they can ignore the Bolt competition problem. According to shorts, Tesla is already having to park 3s to sit for weeks and possibly months due to over-producing the LR version. They expect to see the same thing no doubt with each variant. That's a very easy thesis to disprove pretty quickly. Tesla should be able to rapidly disprove it over the next 6 months. I used to worry a bit about whether I was being overly optimistic about Tesla. I don't have that worry anymore. The shorts are simply and massively on the wrong side of this thing. They will win some battles on volatility but longterm they are in trouble.
Click to expand...
I'm annoyed by the generalizations and like-referential "support" in these sorts of debates.

Example "In comparing Tesla to Jaguar, the I-Pace is blowing it away!". While some sites/mags have proclaimed this,

  • There are also a number that have not
  • Actual analysis of the capabilities, including interior space, range, and charging capability suggest otherwise
  • Some of the proclamations about this are from sites with a clear bias
  • etc...

Yet none of that matters, because they go for the soundbite. No real analysis done, just an arrow to sling, and then move on to the next point when challenged.
 
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#23,454
Hogfighter said:
I am somewhat surprised that we haven’t seen more short covering (according to Ihor). Do they really not believe what was presented on the ER and CC?
Click to expand...

Being short/bear a stock actively is a difficult mental state to break out of. I think there are two main categories of shorts.

"Type I" shorts are the 'genuine believers', who are genuinely convinced that:
  • Elon is a fraud and the Antichrist reborn, who only wanted to go to that Thai cave to drown little kids.
  • Tesla is a zero, a nil, a nada, and that in fact NASDAQ should introduce the concept of negative prices so that their inevitably successful short position can run all the way to -$100 per share.
  • That the Tesla quarterly statements are obviously manufactured, that this is a second Enron and Theranos, where Enron hero Jim Chanos has unmasked a level of fraud for the history books.
  • (Bonus: EVs are an expensive fad for rich people who want to kill the sweet smell of gasoline. That gasoline and its exhaust is carcinogen is just as much of an un-American lie of the tree-huggers as this global warming nonsense which was only concocted to line the pockets of Al Gore.)
  • I.e. they are shorting Tesla because they hate Elon and hate the change Tesla stands for.
These "Type I" shorts are only going to dig in their heels.

Then there's "Type II" shorts:
  • They are reasonably good investors and have read plenty of quarterly statements and made some good investment decisions in the past. They consider themselves to be rational investors.
  • They really suck at shorting high-tech firms though, and have trouble valuing hyper-growth companies that combine new disruptive technologies with a significant first-mover advantage - like Tesla does.
  • To them Tesla is 90% of what the past 8 years of their quarterly statements tell them: a big, big mess and an overvalued company in big liquidity trouble. They only see a negative net working capital, awful gross margins, ridiculously high R&D spending and ignore the intangibles potentially worth trillions (literally), such as automotive or the new high-tech EV market that could easily be 2-3 times the size of the automotive market - because they are not on the balance sheet.
  • I.e. they are shorting Tesla because of the negative picture their financials paint, they believe that Tesla is a hype stock and a bubble of a seriously overvalued company which needs to trim its stock price - and why not earn money while the trimming is done.
Then there's also "Type III" shorts:
  • Top people of New York hedge funds, moving billions of dollars. Top education, very good grasp on how the markets work, very good access to the markets, and a mostly cynical view of all things life.
  • Most of them have probably never performed honest work in their lives and have no trouble shorting an American manufacturing company if they think they can make a buck. They never use mass transport (daily helicopter transport is so much less suspect to traffic jams thank you very much) and are rarely exposed to the toxic air of inner cities either, so the 'green' and planet saving aspects of EVs don't connect with them. They obviously also don't see all that many Teslas.
  • These people (correctly) identified Solar City and then Tesla as a potential target of an attack against their sources of financing: both companies were/are 'leveraged' to a great degree with exposure to constant sources of financing, roll-over of debt and in the case of Solar City the constant flow of new short term funding backed by their long term loans and leases. If funding dries up then stock price crashes.
  • These guys, possibly in coordination, initiated tens of millions worth of TSLA shorts originally done against SCTY but now inherited by Tesla.
  • These guys have both media contacts and extensive contacts all around the financial world: analysts, rating agencies, you name it. They know how to work the news against Tesla and are probably not shy to perform a dirty trick or two - they don't care if it's illegal as long as it does not result in a prison sentence.
Of the ~34 million shares short position on TSLA I believe most are owned by "Type III" shorts: well over 20 million I believe. A couple of million (up to 5) are owned by "Type I" shorts, mostly through small retail positions - the remaining 5-10 million by "Type II" shorts.


Here's how these categories of shorts act usually:
  • "Type I" shorts are the loudest and probably make up 90% of the Twitter noise. They actually have the smallest short position in total.
  • "Type II" shorts try to lend credibility to "Type I" shorts.
  • "Type III" shorts are the most silent but also the most dangerous ones: not just due the high stake they have, but also due to the asymmetrically large influence they have on sentiment, through their media and financial world contacts.
Mark Spiegel is IMHO a Type-III wannabee who is in reality Type-I. I wouldn't be surprised if some of the funds in his 'hedge fund' originated from Type-III shorts though - in exchange for the media noise he is generating.

Hogfighter said:
But I’m becoming more and more convinced that the shorts (a) move the SP way less than I have always assumed, and (b) TSLA will be highly shorted for a long, long time based on comparable valuations. Those waiting for a short squeeze might have to wait for Godot.

Oh, and Speigel’s an idiot and lives in his Mom’s basement. We talk about him 100 times more than he deserves.
Click to expand...

To me the following looks probable:
  • "Type-I" shorts will be forced out of their (often over-leveraged) positions once the price breaks through $390-ish price levels. The 'forcing' will be done by their brokers as their margin levels go negative. That will give a nice little pop to the breakout. (Think TT007 but in inverse.)
  • "Type-II" shorts are probably not over-leveraged but they are going to take losses. Q2 financials are technically still looking pretty awful to an old-fashioned accountant, so I can see a fair number of them 'holding' their short positions for the time being. Also, higher price levels should convince them that Tesla is even more overvalued, which is a really bad state of mind to be in, and which can result in pretty bad investment decisions. They'll cover on Q3, or maybe even on early October delivery numbers.
  • "Type-III" shorts are possibly in a 'bear trap' already (average SCTY shorting price levels are $240-$260? Then there's 2 years of short interest - their true break-even price might be as low as $200 at this point - and then they missed one of the biggest bull markets of recent memory ...), and they'll be in even more of a trap over $350. They will try everything in their power. I'm genuinely curious what they'll do once the end of quarter mark-to-market window dressing fails before Q3: people will be expecting a positive surprise, so unless something negative happens to Tesla or to the global markets, I just cannot see a significant drop in the share price prior the quarterly report. Once that happens they might be forced by their own investors to cover, and that could be pretty disorganized, because each of the Type-III shorts is probably watching closely what the other big shorts are doing - if one runs for the door the others will try to go through first. I don't see them having the backing to hold out until Q4 though, unless they are managing their own personal funds, which most of them are not doing I think.
At least that's how I imagine the sociology of TSLA shorts - a lot of it is speculation and conjecture though.
 
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#23,455
If I remember correctly, some time ago a stock movement pattern was described on this thread, that every time there is a big jump up in an SP skipping some price range in daily candles, then the stock tends to return and "fill" the skipped gap before resuming the upward trend. Sorry if my wording is not accurate. The point is that after last week's ER, we had such a gap between Wednesday close and max of around $300 to a Thursday opening of around $330, followed by a small dip (~$326?) and then rising upto a close near $350. If my understanding is correct, wouldn't that mean that we should expect a retracing to fill the $300-$326 gap before going higher up ?

I do not understand what is the actual mechanism or reasoning behind this pattern, so I would appreciate if someone could explain it.
 
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#23,459
Let the growth begin, oh, I mean continue Tesla starts hiring for new $2 billion Shanghai plant

Oh, but wait, there is more . . . https://seekingalpha.com/article/4195452-bulls-may-noticed-teslas-growth-story-dead

I am expecting sudden growth here Elon Musk says Tesla is making a mini-car that can fit an adult

Okay, I am sticking with the first option:D

Option II seems just too FUDie for me, and III, well just cannot compete with Xena.

Early morning green today, I think the morning after coffee is working:cool:
 
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#23,460
Revhappy2 said:
Some insight into the 10-Q
Scant Liquidity, Continued Spending And Inflated Deposits Highlight Tesla's 10-Q Disclosures
Click to expand...

Re: liquidity.....he looks at the exact moment they hit the valley of cash. No mention of profits coming immediately afterwards.

Re: deposits.....so what. Is the author implying low demand for the 3? If so he’s ridiculous. Any other reason stinks of hit piece.

Re: CapEx. I find it amusing that when JB says they’ll (a) spend less on CapEx than planned due to efficiencies, (b) building a Chinese factory will not cost a lot, (c) stating that they don’t need to raise capital for the foreseeable future, (d) will start paying off debt as it matures, there’s no mention of it! Only that Tesla will continue to spend money (with negative connotations). Do they think growth is free? Or that growth due to demand is bad?
 
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