While the uptrend has yet to be violated, uber-longs and fanbois take note that the momentum is fading. Unless a base of new highs can be established, the path of least resistance will be to the downside.
- Potential lopsided head and shoulders pattern forming. Only a print of new highs will invalidate. Expect ~185 points to the downside with violation of neckline.
- Bearish divergence evident in the indicators.
- $5B in new shares being sold to bag holders.
- Battery day will likely be a "sell the news" event.
- TSLA is losing market share in Europe, the most mature EV market. This trend likely to carry over globally as automakers catch up.
- Q3 earnings will likely be a disappointment. Evidence points to the company pulling forward future EV credits into Q2 earnings in order to show four sequential quarters of profitability with failed hopes of making the S&P 500. Without the EV credits, there would have been no profit. Company needs to report a profitable Q3 without support of EV credits, which will be a struggle if not impossible.
- Raising commodities prices will continue to eat into profitability as inflation grows. Look at price of copper and nickel over the last 6 months. Has the company established any hedges?
- Company is already having to lower car prices due to competition (see China). Increased competition will further limit pricing power to offset raising commodities prices.
- Overall macro conditions likely to be more volatile between now and end of the year.
- $200 price target by year end appears reasonable unless Musk pulls a herd of rainbow striped unicorns out of his ass for battery day and earnings (which he might...).
Watch the price action over the next week. If no new highs after battery day, it will be time to think about short strategies. With two daily closes above the recent high, deploy cautious long strategies until earnings in late Oct.
Good luck!
- Potential lopsided head and shoulders pattern forming. Only a print of new highs will invalidate. Expect ~185 points to the downside with violation of neckline.
- Bearish divergence evident in the indicators.
- $5B in new shares being sold to bag holders.
- Battery day will likely be a "sell the news" event.
- TSLA is losing market share in Europe, the most mature EV market. This trend likely to carry over globally as automakers catch up.
- Q3 earnings will likely be a disappointment. Evidence points to the company pulling forward future EV credits into Q2 earnings in order to show four sequential quarters of profitability with failed hopes of making the S&P 500. Without the EV credits, there would have been no profit. Company needs to report a profitable Q3 without support of EV credits, which will be a struggle if not impossible.
- Raising commodities prices will continue to eat into profitability as inflation grows. Look at price of copper and nickel over the last 6 months. Has the company established any hedges?
- Company is already having to lower car prices due to competition (see China). Increased competition will further limit pricing power to offset raising commodities prices.
- Overall macro conditions likely to be more volatile between now and end of the year.
- $200 price target by year end appears reasonable unless Musk pulls a herd of rainbow striped unicorns out of his ass for battery day and earnings (which he might...).
Watch the price action over the next week. If no new highs after battery day, it will be time to think about short strategies. With two daily closes above the recent high, deploy cautious long strategies until earnings in late Oct.
Good luck!
Trade active:
The overall bearish sentiment to the macro picture along with Musk's admission that Battery Day revelations will not add to bottom line for a couple years has loosened bullish support.
I continue my stance that Battery Day will be a "sell the news" event. Unless price takes out a new high this week, it's looks like a downward movement to the neckline at ~360-380 will be reasonable. If it takes out the neckline, buying some November or December puts could be a nice play. If this is combined with a strengthening dollar and further risk off sentiment given the fiscal cliff and volatile political landscape, the downside move could be more rapid that folks would expect.
I continue my stance that Battery Day will be a "sell the news" event. Unless price takes out a new high this week, it's looks like a downward movement to the neckline at ~360-380 will be reasonable. If it takes out the neckline, buying some November or December puts could be a nice play. If this is combined with a strengthening dollar and further risk off sentiment given the fiscal cliff and volatile political landscape, the downside move could be more rapid that folks would expect.
Comment:
Mr. Musk failed to pull a single rainbow-striped unicorn from his ass during Battery Day. The stock price is likely to suffer accordingly. December puts or selling vertical call spread should be a money maker.