Is it right to take a bearish position on $TSLA? I’ll let you figure that one out. You’re pretty smart, right? (August 21, 2020)
TSLA
Tesla ( NASDAQ: TSLA ); this is a stock that has done really well since we were first looking at this on this breakout. It was kind of interesting, I’m not doggin on anybody in particular, I’m really, really not because I can’t predict the way this stock is going to go. But I saw something on CNBC, whatever that thing is that they have on Friday. I think it’s a half-hour show that is sponsored by some option company. If It’s sponsored by thinkorswim, find anybody but thinkorswim to handle your stuff. Those people go out worse than a light bulb in a massive windstorm. They’re down more than they’re up it seems like. But anyway, I digress and I had to digress because they really ticked me off, and everybody else too.
So here’s the thing, they were looking at Tesla ( NASDAQ: TSLA ) and talking about a call spread, which I thought, well okay, that’s a pretty good idea, you’re buying a call and then hedging it by selling a higher strike. Yes, you could do that, that’s one way to do it. They are pretty expensive so you’ve got a hedge. And then I looked more closely and I’m going, “I think the strikes are wrong. What are they doing here?” Then I realized, what they are doing is, they are doing a bearish call spread, a bear call spread. They are actually selling a lower strike and buying a higher strike to protect themselves. And talking about how the premium is so rich and you can make so much money on this on a defined risk trade. And honestly, this is what I am thinking because I’ve been doing this a long time. And I’ve invented ways to lose money that nobody has even thought of, so I know how to lose money. And one great way to lose money is to bet against a really strong trend; because by definition are really strong trend has a lot of people betting against it. Why? Because the definition of a really strong trend is this: Well, crap, you don’t see that happen very often. I think I’m going to buy this stock. That is the definition of a really strong trend.
You guys know what Tesla ( NASDAQ: TSLA ) has done. Last June it was down here, now it’s up here. I’d say an 885 percent return in less than a year and a half, actually just a little over a year, that’s a pretty good number; that would have been my favorite stock. You could say, “Well, it’s going to 2000.00 and that’s the end of that.” Well, that didn’t really happen, did it? It happened for a minute; it happened for half of the day yesterday and then the stock is up more. So I don’t know how you can be against Tesla ( NASDAQ: TSLA ) by saying, “Well, I wouldn’t short it here but I think it’s definitely not going up to there.” We don’t know that, you do not know that. And you can say, “Well yeah, but my trade is hedged.” Look, if you are on the wrong side of the trade all the hedge means is that you are not going to lose as much money as you would without the hedge.
My suggestion on this is, you’ve got to be trading the stock. The stock moves plenty, it moves plenty for you to make all of the money you want if you are correct. So what I would do is this, I would look at the way the stock is trading; the low is at 2025.00, the stock typically does not hit new intraday lows. It kind of did here on the second day of a pullback and then immediately exploded higher. The last time it printed lower lows was back here about 10 days ago or so, so this trend is still high. What I would suggest doing is hang onto this stock. I could absolutely make a case for this, the stock is going to pull back, this was kind of a little peak here and it could pull back. $100.00, maybe even 150.00 so definitely get after it on the short side. But guys, this thing has been going up forever and how anybody can say this is the top or maybe not here but definitely here. You are guessing. There is no other way to say it, you are guessing. And if you are saying the stock is going to do this or you are saying it’s going to do that, you are guessing with an exclamation point instead of a question mark. We don’t know.
So in my view, and it is truly a humble view, it has to be because if you are trading and you are not humble you will be very soon. In my view, there is no way to call a top here. It is absolute silliness to be making a bearish bet on Tesla ( NASDAQ: TSLA ). I did go to the grocery store earlier today. The guy bagging my groceries used to be short Tesla ( NASDAQ: TSLA ), now he’s happy to have a job. The point here is, you stay long Tesla ( NASDAQ: TSLA ). It is very, very “nose bleedy” to buy here, but the stock is splitting 5-for-1 on the 28th. I think the real action is going to come after that split and this is why, it could go either way in a big way. But between now and the split I suspect that the most the stock is going to do is pull back a little bit. But the more logical thing for it to do would just be to keep on running, at least that’s the way I see it.
Just so you know, I did take profits on Tesla ( NASDAQ: TSLA ). It has been a great trade for me. Hopefully, you have followed it all of the way through this Chart of the Day video. I also post that stuff on Twitter, so if you don’t follow me please do so, it’s a real complicated handle, @DanFitzpartick, that’s it, @DanFitzpartick
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