No deal with Hertz ($HTZZ)? No problem? (November 02, 2021)
TSLA
I just want to make a quick point about Tesla ( NASDAQ: TSLA ). Yesterday I held a training session for our members and one of the things that I was covering was Tesla ( NASDAQ: TSLA ). I was saying how the most money is made in a stock actually right during the blow-off phase when a stock goes from a nice drift like we have a heck of a drift in Tesla ( NASDAQ: TSLA ). Then it starts accelerating, and then the acceleration gets steeper and steeper and steeper. So the whole thing really just starts to go vertical and you are making the most money right here.
The issue, though, is, after all of this money is made the most money lost is during this initial reversal. It is basically just like an airplane going up really, really steep and finally stalling, boom, and then it comes back down. I’ve done that, though it was deliberately as part of the training and it was actually kind of fun, but not so much with stocks.
So anyway, first thing this morning, I didn’t see the tweet but I read about it, Musk says, “Well, by the way, our stock, nothing in our fundamentals has anything to do with Hertz ( OTCMKTS: HTZZ ) because we don’t even have a signed deal for those 100,000 cars.” Meanwhile, of course, Hertz ( OTCMKTS: HTZZ ) is saying, “We are already taking delivery of those cars.” Of course, in my book, if we are taking delivery of the cars, and the guy who is supposedly selling them to us says that we don’t even have a signed deal yet, I would turn around and say, alright, shoot man, thanks for giving us these cars, I guess we don’t have a deal, but that’s just me.
Anyway, the stock kind of tanked, not kind of, it really did first thing in the morning here. Then it rebounded almost all of the way to yesterday’s, what I will call, enthusiasm high. And even as we are looking at the stock right now it is starting to pop out of a volatility squeeze. This is on a 5-minute chart and we still have got a little over an hour left to go in the day.
So as I look at this I am seeing a stock moving way up on enthusiasm, moving down in horror, and then starting to go up again on this sense that, okay, it’s relief, I thought that was going to be tough. But then we are getting more of a decline, more of an orderly decline back to this same level. So we’ve got the stock trading at similar levels on the same day. Only look what happens, this one is almost vertical, well, it actually is, from 4:00 yesterday to 9:30 this morning it’s vertical, and then it is coming in more gradually here.
So it has been more of an orderly descent, but nevertheless, the squeeze is still the same. The stock has just been trading sideways for so long and now it is finally starting to move higher again, and this is into the day, into the end of the day. And so, frankly, if I am day trading this stock I am going to wait and see what happens after we get past 3:00 as we start to get into the last hour of trading. And then I will want to see whether we are getting more cleanup orders to the buy side. You can see a dramatic increase in volume on these 5-minute bar charts, so in just the last 5-minutes we are seeing a lot of volume.
Now, before you read too much into that, you have to almost kind of look at it as a reverse. It is not that there is so much volume right here, it is that there is so little volume back here, certainly here, but you can just even go further back. We are getting this kind of tapering off in volume and then finally it’s going sideways. And the reason this is important is that I don’t want to read too much into this increase in volume. You are virtually always going to see an increase in volume towards the last hour of trading just because during the middle part of the day there is not just volume there.
Anyway, I don’t know whether Tesla ( NASDAQ: TSLA ) is a buy here towards the end of the day. But I do know this, as I look back at the daily chart, which is the one that I am really interested in, this is an inside day. We have had these inside days before, but this is at such an extended level that, as I look at the chart I see, typically I would say, you have got to short this stock or at least sell some calls against it on the upside because it is just done going up after this tweet, and the stock hasn’t just recovered. But on the other hand, it is not down as much as you would think it should be.
And so, why is that? Well, logically, let me see; if Hertz ( OTCMKTS: HTZZ ) is already taking delivery then they think they have a deal. Maybe they do have a deal and Musk was just being Musk. Who knows? But if Hertz ( OTCMKTS: HTZZ ) is taking delivery and they are actually saying, yes, we are having strong demand, blah, blah, blah, they are going to buy the cars. Sooner or later they are going to buy them, a deal is going to be struck. Nobody is going to walk away, Musk isn’t going to walk away and say, you know what guys, I don’t like the deal. Give me my 100,000 cars back.
And when Hertz ( OTCMKTS: HTZZ ) is saying, you know what? We might bump it up to 200,000. Okay, well that would put a little different spin on things, wouldn’t it? And what happens if Avis ( NASDAQ: CAR ) or National or another rental car company says, you know what? We are kind of feeling the heat here. We need to get some of them Teslas ( NASDAQ: TSLA ) too. So there are any number of potential catalysts out there to drive the stock even higher. However, at this point, particularly after this kind of move you are really just playing craps. In fact, you are really just playing roulette. You are putting your money out on the table, red or black, you are going to win, you are going to lose.
To me, this is too risky for me. I sold half of my position yesterday, which turned out to be a really good trade. I sold the other half this morning. I gave up a lot of what I made yesterday, but I only gave it up on half of the position because the other half I sold for a nice gain. So overall, this was actually a good trade for me, and I balanced the risk/reward. I balanced the risk of missing out on more profits by selling the whole position or taking big losses if I held the whole position. So I split the difference between the two, sold half, and wound up making a nice trade on a stock that is really, really risky now. Anyway, I hope that explains some of my mindset to you.
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