Do the fundamentals of Tesla (TSLA) even count? Not in this trade, they don’t!
Discussed in this article: Tesla Motors Inc. ( $TSLA )
I want to look at Tesla ( NASDAQ:TSLA ) here. The company announces earnings next Wednesday. I’ve mentioned this before, and the reason I’m mentioning it again is because I want to keep this in front of you.
How the stock behaves after earnings is something that I really couldn’t care less about than I already do. I don’t know what the earnings are going to be, I don’t know. Do I care? Not so much. Do you know why? I don’t care because there is a world of time between now and next Wednesday. Eight trading days, this stock could be a 150.00, 160.00 points by then. That’s not a prediction, that’s not a bet, it’s an observation; and this is why.
If you are long Tesla ( NASDAQ:TSLA ), again, we’ve got eight trading days to go, if you are long Tesla ( NASDAQ:TSLA ) you’re certainly trading this momentum. Are you going to leave this stock now? Are you going to be selling it now? No, are you going to be selling it when it hits 140.00? No, you’ll be looking at it pretty closely, but the bottom line is, you’ll be hanging on to it.
If you are a short seller you believe that Tesla ( NASDAQ:TSLA ) is overvalued, it is overvalued, there’s no question about that it’s overvalued. But markets are irrational at times, all the way up until the time reality comes crashing down on the irrational traders. But we’re not talking about reality here, we’re talking about Tesla ( NASDAQ:TSLA ).
So if you were going to short this stock, are you going to short it right here as it’s breaking out to a new high? Now if you were the knucklehead who shorted Uranerz ( NYSEMKT:URZ ) at 250.00 then you probably are going to short this stock with whatever money you have left before you lose that too. But you’re not going to short this stock, you going to be waiting until after earnings, or maybe just before earnings because you’re looking for something different.
The bottom line is, you’re not going to be shorting this stock right here. If you are already short this stock, what are you going to be doing right now? You’re going to be wondering about how quickly you’re going to cover tomorrow. So my point is, again, I’m looking at earnings as something in the far distant future. My point is there is no catalyst what so ever that’s going to drive this stock down until earnings, which are lifetime away, the middle of next week.
So what I suggest you do is, you stay long this stock, and if you’re not long already then get long. Even though you might say, “Oh my god the stock is so overvalued, at 134.00.” Right, and I care why? We don’t care that it’s overvalued, we are not trading the fundamentals, we’re not trading Tesla ( NASDAQ:TSLA ), we’re trading this chart, and the news flow, and the fact that the stock just keeps going higher, and higher, and higher.
What I would suggest you do, if you’re long just stay long, I am, I can’t buy anymore, I got about as much as I can possibly have that wouldn’t before I start violating my risk profile as far as how much percentage in my portfolio I can have in one stock; I’m already there. I will however be looking to unload a lot this before earnings. I just don’t think I’ll have to sell it at 134.00, I think I’ll be able to do it a lot higher.
But if you are not long yet, then use this simple strategy, I do this all the time to help people get in a little bit late on a trade; you use today’s intraday low of 128.25 as a reference for the power of sellers; assume that you’re going to sell the stock, whenever you’re buying, assume that you’re going to sell at $127.90, that’s 35 cents below what today’s intraday low is. That’s how much risk per share you are taking. Now, how much risk are you willing to take from a dollar amount? Well, divide that by the amount of risk between now and 127.90 and that’s how many shares you are going to be buying in this stock.
I just suggest that you continue to stay long this stock. If this is not your trade then it’s not your trade. Really, when you look at the Bollinger Bands, this stock is kind of coming out of a little volatility squeeze.