Thinking about shorting Tesla (TSLA)? Here are some parameters. (October 27, 2016)
TSLA
We are looking at Tesla ( NASDAQ:TSLA) today. The company reported earnings yesterday and the stock gapped up. It did the same thing that a lot of these stocks that are reporting earnings, that prompt buying, are doing, which is, gap right up to a prior high. That is really what is happening here. Somebody asked me in our monthly Q&A (Question & Answer session) that I had last night, would I short Tesla ( NASDAQ:TSLA)? I have felt like Tesla ( NASDAQ:TSLA) was shortable for a long time. But I am the proverbial weak hand. I am not going to short this stock at $200.00 or whatever it is because I think the stock should be lower, and then watch this thing move up to 250.00 while I am still short. I am just not going to do that.
So my point is, the stock, even though according to this chart anyway, it is in a kind of a volatility squeeze. The volatility is starting to tighten up. On the daily chart you can see that it is just below this 200-day moving average. So I am looking at this as actually a pretty low-risk short entry. See, the stock came up for the second time and hit this 200-day moving average and couldn’t hold above the level. You may want to buy Tesla ( NASDAQ:TSLA). You may just think, “Oh my gosh, Elon Musk, he is so smart.” Great. Then go ahead and do so. Although, if you are the buyer I would recommend this: I would recommend that your buying be like a ride-along with somebody that is doing some short covering. Because my suggestion is, you go ahead and short this stock. And by the way, if it happens to come up closer to 210.00 or so, all the better. Better time to short the stock.
The point is, that you want to have a buy stop, this is why this is green. You want to have a buy stop slightly above the 200-day moving average, and really like this high here. You want to have it slightly above that level and then the only way you are not short the stock is if you are wrong. If it turns out that, no, this little consolidation here is actually on the way to moving back above the 200-day moving average and starting to move higher. You don’t want to be short Tesla ( NASDAQ:TSLA) when the stock is moving against you. Just like you wouldn’t be long Tesla ( NASDAQ:TSLA) if the stock is moving down this way. You want to be in phase with the trend, you want to be on the right side of the trend. Right now, frankly, there is not trend here. I have got to say it is just drifting sideways.
By the way, most stocks don’t have trends, which is why the ones that do they say, “A trend is your friend.” I don’t have a lot of friends. I don’t want a lot of friends, I am too busy. But when you find a trend, take it. Do it. But here, this isn’t really a trending stock, it is just continually weaker. It is setting these kind of lower lows. Let me just draw this triangle, you don’t see a whole lot of these anymore. Lower highs, essentially like flat lows. So you are shorting here, as close to here as you can, and you are anticipating this kind of move. If it doesn’t happen, but again, the stock moves up a little bit, then you get out. That’s it; easy-peasy.
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