Bad news on Tesla (TSLA)? Time to buy! (February 21, 2019)
I want to look at Tesla ( NASDAQ: TSLA ) today and this is why: If anything, buy this thing. I am just telling you, the reason the stock is down, you can kind of see where this happened intraday, the news comes out that Consumer Reports is pulling their recommendation on the Model 3 for various reasons. I won’t even list what they are because if you are a “Teslonian” I am going to tick you off. And if you are not you don’t really care anyway so you could just look it up.
The bottom line is, and this is really all that matters, Consumer Reports just said they are not recommending the car it has problems. Thank you very much we’re out of here. And so the stock drifted lower. I will be honest with you, I was looking at the stock and I was thinking about shorting it. I didn’t see this right off the bat. Some people who were talking about it in our trading forum brought it to my attention.
I haven’t traded Tesla ( NASDAQ: TSLA ) in a long time as a lot of people know. I use to drive a Tesla ( NASDAQ: TSLA ), the Model S. It was awesome at first and then after awhile it started being less awesome. Then I started having all kinds of problems with it and then I couldn’t get into the service shop because they were backed up. And then a lot of times, and I mean a lot of times when I did get it in they never had it done on time. It was just a real mess.
But the thing that really clinched it for me, as far as what made me sell it, I’ll be honest and very plain; I got tired of Elon Musk’s crap. This like the only CEO of a company that I can think of other than like Bill Gates and Steve Jobs both of whom are no longer CEOs of companies anymore, and of course Warren Buffett. So I got some buffoon who has stars in his eyes and government subsidies in his pockets, just a big distraction. So I finally sold the car and said the heck with it I will go ahead and keep Mother Earth warm one gallon at a time and I am very happy.
I don’t trade this stock anymore but when I saw this doing what it was doing I thought, You know, maybe this is the time to be buying some puts on this stock. And they are really, really expensive. I set up a couple trades; I set up a bear put spread, thinking about buying the 300.00 selling the 290.00s or the 280.00s. But ultimately I just decided against it. That’s why I am doing this video.
The reason I decided against it is, Tesla ( NASDAQ: TSLA ) has to be the most crowded short in the world. Everybody who is anybody, who is interested in Tesla ( NASDAQ: TSLA ) is really bearish on the stock. There are guys like Ross Gerber who is probably one of the dumber guys that I have ever seen on the Internet or on TV who is really bullish on Tesla ( NASDAQ: TSLA ). But the shorts are really the traders that are driving this stock.
The interesting thing is, again, this is why I am into it; they are driving the stock because they are pushing it higher. I have mentioned this before; look at this chart, it is a mess. The thing is, every time there is bad news about the company the short sellers are gleeful. You can see them on Twitter; it is kind of funny to watch, actually. They are saying, “Now it’s going to zero,” and this and that. But then the stock doesn’t go down very far.
And why is that? Think about this, because if you are short the stock the only way you are going to be able to take profits or cover your losses, the only way you are going to be able to do that is to buy the stock. There is literally no other way, you have to close your trade out or put on a bullish hedge or something, with the same effect, which is to drive the stock higher, to put some kind of buying pressure on the stock.
So on bad news Tesla ( NASDAQ: TSLA ) goes up because shorts say, “Okay, finally I can take my profits because I shorted up here.” Or, “Finally I will have some kind of opportunity to get out because I shorted here; rode this thing all the way up here and now I am just flipping worn out and I want to get out of this stock. Bad news, down almost 4 percent today, let me cover.”
That is what happens. Bad news, it’s like the stock goes up. And then, of course, good news, the stock goes up because shorts cover. They have got to get out of the stock before it goes to the moon. They can’t believe it. How stupid everybody is who owns Tesla ( NASDAQ: TSLA ). All of that stuff which confidant bears will say. They will be arrogant and talk down on the other side.
Whereas what they should be doing is just managing your money. Just manage your trade. Shut up with all the editorializing about how the other side of the trade is really stupid. If that is true then why aren’t you rich? That’s what I would say. If you are so stinking confident on any given trade, particularly a short trade, then you had better be moneybags because otherwise you are just another guy trading with some dollars and an opinion.
And so with Tesla ( NASDAQ: TSLA ) I am just telling you, as much as I dislike the company, the product, the CEO, there is no way I would be selling this stock. I didn’t short it today and I am happy I didn’t short it. Even though if I had kind of day traded it or something I would have made some money. That, just to me is high-maintenance stuff. And as you are seeing this after hours today you can even see the stock drifting higher a little bit.
So frankly this is what I would do, I will give you the trade. The stock closed very close to the low. The low was 290.50. I will say this, if the stock opens above the closing print here, which is 291.23, if the stock opens above that level, we’ll say 291.30, if the stock opens above that level you buy it. Buy this stock and keep a stop a little bit below it. Keep a stop at 289.95; I am giving you specific parameters. That is a super, super tight stop, like less than a percent. The whole point here is, it has to OPEN above that level for these trade parameters to work.
The only reason that I am saying this is because if there is buying interest for the stock in the morning, after almost a 4 percent fall, if there is buying interest for the stock in the morning it is going to open up above today’s close AND it is not going to then reverse and fall back. It just won’t, that is just not how this stock trades. But it has to OPEN above that level. If it does not OPEN above that level then you stand aside and don’t do a darn thing UNLESS it then starts crossing up above that level.
So I have given you the trade here. Hopefully, this works out. But I am just saying, just because there is a bad news article on Tesla ( NASDAQ: TSLA ), don’t use that as a reason to short the stock. There are a lot of bear carcasses on this chart right here; I don’t want yours to be added to one of them.
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