Here’s your trade on Tesla ($TSLA) (October 20, 2021)
TSLA
I want to look at Tesla ( NASDAQ: TSLA ); why? Well, because everybody else is. If we look here at the daily chart you will see, the stock actually blew through the top of this channel last week. It had been trending really, really well above the middle Bollinger Band, which is the 20-day moving average. And then it really blew through to an even higher level here, peaking yesterday.
We have a trade going on, on Tesla ( NASDAQ: TSLA ). We didn’t get in way back there or anything like that but we have been riding this thing for a while here. And so after this kind of move then it’s time to kind of start protecting profits. And so what I had suggested to our people is, go ahead and take some off the table, but then leave some on just in case the stock keeps going.
This is all about risk management, this is what I am talking about now. And so why did I decide to do that? Well, first of all, because the stock tends to sell off after a big earnings run. It is kind of like it doesn’t even matter what the numbers are, there will be profit-taking, again, especially after the stock has made a big run, which it has. So this time around, they beat on their margin, they beat on their earnings per share, but they didn’t beat on revenues, they missed revenues.
In my view, revenues are the most important number because if you are not selling all of the other stuff doesn’t matter. You can always monkey around with profit margins by moving things around. You can always monkey with earnings as well. The one thing that you can’t mess around with is revenues. There is kind of a way you can do that too, by kind of pushing stuff either ahead or behind a certain benchmark, but that’s for another day, and it isn’t going to be me talking about it because that is not what I do.
The point that I am making here is, so we say go ahead and take half, so that’s what you do. And then you are expecting the stock to either fall by 40.00 or rise by 40.00. And that is what the options market implied, so that would take it up to, we’ll say, 900.00 on this side and about 820.00, we’ll say, on this side. Well, the stock didn’t do that, the stock is staying right in the middle of the range. I don’t think it is going to stay there tomorrow. But the point is, I think this is really impressive that this stock, after the run that it has had, did not sell off even though they missed on revenues.
What I would suggest doing is, if you are long the stock look at the weekly chart. The weekly chart will give you a better reference now and this is why. I drew this stuff quite a while ago, and what I was expecting, kind of hypothesizing was, that if this stock, if it would just trade sideways, which it did, if it would just trade sideways for a while and then start ticking higher we could see a nice run, frankly, to $1,000.00. And I still believe that, though it isn’t going to happen tomorrow, or next week, next month, or even this year. Well, there are only 2-months left so I’m pretty sure it’s not going to happen this year, but I am pretty sure it is going to happen. So you just have to decide what your holding period would be.
I would just suggest this, if you are holding it over earnings I think your holding period goes through tomorrow. I think you are going to be fine on this. It hasn’t sold off in the way you might think it typically does. It hasn’t rallied but that’s actually a good thing because the stock is already extended. So the best thing in the world for this stock to do, as far as the health of the uptrend, is just to keep grinding around there for a while. Let everything catch up to it, and then finally, in about a month or so, boom, then it takes off and gives you a nice Christmas present.
Free Chart