Thinking of trading Tesla ($TSLA)? Here’s what I think. (July 15, 2020)
TSLA
Let’s look at Tesla ( NASDAQ: TSLA ) today. I have no position in this stock so I have no axe to grind, no position to burnish, I am just talking about this stock. I took my profits, not right at the top up here but I took them on Monday. I posted that on the world’s most famous ash heap and dumping ground, Twitter, that I just got out of the stock. I am kind of looking, still, for 2000.00 but I am not putting my money where my mouth is. There I said it, I’m not.
It looks to me like that’s where the stock is going to ultimately go. To me, I think this is pretty bullish for the stock that gapped up, ran up on Monday and closed near the low of the day, I remember looking at this, I wasn’t really at my desk when I saw this and I thought, I wonder if this is a climax top? This could be it, this could be it for the stock.
I know all of you “Muskians” and “Teslonians”, you just got the vapors hearing me say that; because everybody knows this stock is going, ultimately, to Mars; it’s not. But nobody thinks that this stock is ultimately going to top. It just keeps going up and up and up. But as I was looking at the price range here I thought, huh, this stock really seems like maybe it’s hit a top.
However, I have seen many climax tops in my day. I have made money on some of them and I have been absolutely embarrassed and broke on others. Happily, the latter case was early in my trading career and the former case has been not so early in my trading career. It takes a while to see these.
If this was really a climax top what you would have seen on this type of thing is not a move like this and then a close near the bottom. You would have seen this kind of thing; you would have seen a really long tail and then a close at the bottom of the range, that is a climax top. And then what you would see after that is, you would see the stock trade lower and lower and lower still; maybe even to the 50. And then you would see it kind of wander around here a little bit and then I don’t know what. That is what a climax top would look like. This is not that, it’s not one of those.
This right now as I see it is a money-sucking wench. What I am saying is, it’s not going down, it hasn’t worked off enough supply to go back up and so it is just sitting here. And also, we’ve got July options expiration coming up the day after tomorrow. And so I am looking for the stock to probably get pinned somewhere around here I am just not looking for a big massive move one way or another.
What I would suggest doing is, if you are already long Tesla ( NASDAQ: TSLA ) you know where you stop is; if you don’t have one good luck to you and that’s great, you know where your stop is. If it was me I would probably keep a stop under yesterday’s intraday low, but I would not be buying this stock right now.
Again, I am just telling you, it would be nice for me to be pounding the table on some stock and have people that watch this go, oh, I love Dan, he is so great. He gave me a great price target. I know I am going to make money on this. That is not what this video is about. This video is to inject a little sanity and a little risk management into your trading.
If you can just watch this thing trade sideways for a bit you will ultimately get a better entry, a lower risk entry relative to your reward. The reason I am saying it that way is because I just don’t see, over the next day or two, the stock running up to a new high. Not unless Elon tweets something, which could always be the case. Hey, he just tattooed an infant and named it something that I don’t even know how you pronounce the name, so this dude will do anything, you just never know.
As I see it the best trade here is no trade. The best trade is to watch this trade. Somebody, it wasn’t me, but somebody was talking in the forum today. They kind of almost took offense because they thought somebody said, “What do you mean you can’t make money shorting Tesla ( NASDAQ: TSLA ) or buying puts?” I don’t really think anybody, at least on our website, has said that you can’t make money shorting Tesla ( NASDAQ: TSLA ),
You obviously can make money shorting Tesla ( NASDAQ: TSLA ) and I’m not a “Teslonian”. Their quality control sucks and that kind of takes me right out of the game. If I want to drive something I want to know that it’s going to go where I want it to go in the time that I need to be there. So I am not that guy but I totally respect a stock that does this; how can you not?
What I am saying is, you watch the stock, wait for your ship to come in. If you are trying to short the stock it’s just a really, really risky endeavor. What if you had shorted the stock here on Monday? Of course, if you had shorted it right at the top you are probably a liar because you didn’t but somebody did. So that’s great; then the stock comes down and you are up 15 percent.
Well, on the other hand, you could have shorted right at the close because you think this is the way the stock is going to trade and now you are flat and you are wondering what the heck is going on. I am just saying the pressure still is on the buy side. Traders are still coming for this stock and I will tell you one thing if I was short this stock I would be really nervous, really nervous.
The company reports earnings next week and you literally never know what their earnings are going to be. They could report that they have sold 50 million cars yesterday, they could, you never know. Then later it’s like, we were just kidding, but the stock is up at $8000.00. You just never know with this stock so it’s really, really risky to hold a stock like this over earnings. I am not saying don’t do it, some of you will. And if the stock pops you are going to be making a million bucks and you are going to say, “Well, Fitzpatrick doesn’t know what he’s talking about.”
I actually do know what I am talking about because I am not talking about the direction of the stock. I am talking about the risk that you take in owning the stock over earnings, because the stock could just as easily trade down to where you are freaking out. You sell your position for a big loss and then of course as soon as you do that the stock rebounds without you. So it’s just really risky.
Then you could say, “Okay, I am just going to hold it come hell or high water. I don’t care what the stock does.” Well, actually, secretly, yes you do. But if you decide that that’s what you are going to do then hopefully this happens as opposed to this. So this is a real risky stock to be holding over earnings. If it’s me and it is I am just waiting for this stock to consolidate and give me a little bit better entry before I even consider making the trade. And you can see over this chart, that the stock will ultimately do that. It is just that right now it’s not going to do it on your time frame.
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