Are you watching Tesla? Seriously…you should watch Tesla. I’ll tell you why. (March 01, 2019)
TSLA
I am coming back to Tesla ( NASDAQ: TSLA ), frankly, because I feel like I need to clean something up or just moving along here.
Last week when Tesla ( NASDAQ: TSLA ) was down here I mentioned they had some stories about “Elron” Musk’s latest tweet or whatever the case may be. And I said, “Look, bears, don’t get cocky.” This is a stock that has like rubber bands on it pulling it higher all the time. It is like bungee cord stuff. And so bad news, the stock bounces. Bad news, the stock bounces. Good news, the stock bounces. It is always something but ultimately, and this is the important thing, I don’t care whether you are a Musk fanboy or whether you hate the company, it doesn’t matter to me I’m looking at the chart. Seriously, it doesn’t matter.
We are seeing these lower highs; we are seeing these lower highs. So what is that telling you? It is telling you that institutions are selling to retail traders; institutions are selling to retail traders; that’s what’s happening. There is this guy, he is a real buffoon in my book, and he could say the same thing about me so it’s nothing personal, this guy named Ross Gerber who is like a big fanboy; Tesla ( NASDAQ: TSLA ), rah-rah-rah and all that stuff. He has been doing everything he can to be on TV pumping up Tesla ( NASDAQ: TSLA ) forever. But his arguments are kind of ridiculous in favor of it.
That’s okay, but the reason I am mentioning this is, he would give you the impression that his fund, Gerber Kawasaki, here, here’s an endorsement, put your money with him. He gives you the impression that his fund is absolutely chock-full of Teslaa ( NASDAQ: TSLA ). He has got MASSIVE bets on Tesla ( NASDAQ: TSLA ). Oh my gosh, he’s right, the rest of the market is wrong. It is going awesome, this guy is really, really, really confident about Tesla ( NASDAQ: TSLA ).
Okay, fine he could be right. Wasn’t it some analyst that gave the stock a $4000.00 price target or something like that? The reason I am bringing this up is, then you look at the public disclosure documents, I don’t know what it is, the “F” this or the “Q” that or the whatever, you look at their public disclosure documents and he has a very small position in Tesla ( NASDAQ: TSLA ), as most money managers do, they don’t make some massive huge bet on a stock. I think he as like 4.5 percent, I could be wrong and I will hear from somebody and that’s fine, I don’t care. But he has got kind of a standard position in the stock, whatever that is, 4, 5, 6 percent in his fund; at least that is what I read but I don’t really keep up on it.
The point is, you listen to the rhetoric (now I am getting away from him, though he is a perfect example of this, just in general) you listen to the rhetoric on financial TV or on the Internet and Tesla ( NASDAQ: TSLA ) traders and investors fall into two camps, those that are total fanboys like good old Ross and those that are absolute Tesla ( NASDAQ: TSLA ) haters.
The bear argument on Tesla ( NASDAQ: TSLA ) is awesome. The bullish argument is, honestly, it is stupid. People that give fundamental reasons for owing Tesla ( NASDAQ: TSLA ) like, Oh it’s great, it’s going to be awesome, shut up. There is no reason to own Tesla ( NASDAQ: TSLA ), you can’t defend it from a fundamental standpoint. This stock is so MASSIVLY overvalued relative to the auto industry. I am not griping about it, I’m really not. I don’t have a position in this stock, though, I am going to and I will tell you about it. What I am saying is, there is no rational reason to own this stock from a fundamental standpoint yet here the stock is at $300.00.
There is a lot of stuff going on, there is a lot of information out there on Tesla ( NASDAQ: TSLA ). But since 2016 Tesla ( NASDAQ: TSLA ) is now up, it’s a double; nice, from the very bottom in 2016. A lot of stocks are up even more than that. So I am not griping about the long-term prospects here or the long-term performance of Tesla ( NASDAQ: TSLA ).
What I am saying is, when you have got some money manager who is totally vocal about how awesome Tesla ( NASDAQ: TSLA ) is and how everybody else is so stupid and the stock is still making lower highs and you see that his big position isn’t really a big position after all, not like you would think. This leads me to conclude that institutions are selling; they are selling into this. Retail peeps are buying and there is not enough retail money in the world to keep a stock up for long. That is why this stock is down. That is why the stock is doing this, it is coming down, it is really choppy, it’ really volatile. But shorting this stock has been an absolute fool’s errand. You just get killed shorting this stock unless you are super committed.
Here’s what I think; I am going to give you one. They have got these convertible bonds for almost a billion bucks, 850 or 900 million dollars that they have to pay cash, they had to pay cash, I believe it was on the 1st but I don’t know the details of all that and I don’t care. The bottom line is, “Elron” had been hoping, of course, that the stock would be up here and then they could just pay off the bondholders in stock; that didn’t happen. So the cash position of the company is dramatically worse.
At the same time they are closing their retail stores, which means there is going to be another round of layoffs. And by the way, if you are closing your retail stores and saying, “Hey, you could just buy it all online,” and you are not Amazon ( NASDAQ: AMZN ), that’s a trend in the wrong direction. So none of this stuff looks good
And then, remember when, it wasn’t too long ago when “Elron” said, “Hey, a $35,000.00 car, we can’t do that. Building a $35,000.00 car will cause us to go out of business.” You could look it up and I agree. That is the one thing that guy has ever said that I agree with or believe I should say. Selling a $35,000.00 car, they lose money on every car. I know the jokes about, Yes, so did Amazon ( NASDAQ: AMZN ) when they sold books. “Elron” isn’t Jeff and Tesla ( NASDAQ: TSLA ) isn’t Amazon ( NASDAQ: AMZN ), you must trust me on that.
So he said ages ago, “We can never make a $35,000.00 car. Oh, did I ever say that? Oops, my bad, we are not going to do that.” So what do they announce? Hey, a $35,000.00 car and you can buy it online right away. What I am saying is, the fundamentals, the business prospects, the demand, etcetera, etcetera, etcetera, is absolutely falling off a cliff on this company yet again; here we are. The stock is above this last big whoosh low. I don’t care about “Elron” being under investigation by the SEC and this and that, that doesn’t matter to me, that’s the obvious thing. Everybody already knows that it’s all factored into the price of the stock.
Here’s what I am looking at: I am looking at this part of the price pattern, right here that goes back several months. This is really the trading box that matters. This was the low, this was where this breakout was tested finally and resoundingly passed. And so I would say, as long as the stock is inside this box do not be short this stock. If you are, make it really gentle because this stock can certainly bounce.
But, if this stock starts to fall below this January low here’s my bet: My bet is, all these folks that bought here, and they are all retail traders, some of you are probably in that group and you are saying, “Fitzpatrick, you don’t know what you are talking about.” I might not, fine. But this is what I think; you are going to get a boatload of people rushing for the exits. And this is why, because of the passage of time. There has been a lot of time, a lot of developments that have happened since October when the stock was at this low and when it was at this low.
So it is my theory that if the stock falls out of this box, it can probably come down to 250.00, not overnight, though it would surprise you how fast it could happen, think this big whoosh and this big whoosh. But the stock could come down to 250.00, rebound and I doubt it will ever get back up above here, I mean ever. So your trade is to wait patiently for this stock to break through this January low. That is when you short the stock; look for a rebound at 250.00. The stock comes up and then you re-short the stock. That’s my trade on Tesla ( NASDAQ: TSLA ).
God bless Elon Musk for all he is trying to do with his mission and this and that and the other thing. But you know what? It’s hard to build a car. I don’t care how smart you are it is hard to build a car, that’s what I have to say about that. And I am not really dissen old Ross Gerber. All I am saying is he is kind of a cross of a retail trader and an institutional trader. He is not is not particularly smart on the institutional side but he is definitely smarter than the retail guys, no question about that. I am just saying he is kind like the shining star for the intuitions cheering on Tesla ( NASDAQ: TSLA ). So when he is the last hope that they have, and I am sure you can check him out on all major financial networks, that is not boding well for Tesla ( NASDAQ: TSLA ).
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