SINCE BOTH TESLA TSLA AND PRICELINE PCLN reported earnings and those are now out of the way, I'm willing to say that I think PCLN will underperform TSLA and continue the pattern here of a giant cup&handle formation. I was tempted to post this trade prior to the earnings, but didn't think it was worth the risk of a massive gap-move on earnings day.
I think the return will come from PCLN going down and TSLA going sideways, but this RATIO CHART is the daily price ratio of the stock prices. Think of it like a $16 stock with the ratio at 0.16 here. If it goes up to 0.19 it will be a relative 13% gain in TSLA versus PCLN. The risk is roughly 10% but the odds are high for a profit, from my perspective.
This is truly not a CUP&HANDLE in the truest sense of the definition - it isn't a show of "accumulation" of Tesla relative to Priceline, rather it is just a chart pattern that is similar to it. It doesn't have the LOGIC of the accumulation pattern that an actual stock will have.
Cheers.
Tim 10:45AM EST 5/9/2014
Comments
motleifaul
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At moment the Tesla chart doesn't look very different to the priceline chart.
Perhaps it's better to wait a bitwith the Tesla short entry?
timwest
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If the ratio starts to creep up it will strengthen my resolve. I see what you mean though. As for now, the ratio is acting like this is the wrong idea right off the bat. Look for PCLN to be weaker than TSLA and this trade will be "green light". For now it is "caution light" since PCLN is up more than TSLA this morning.
timwest
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Hey motleifaul - I re-read your message and see that you thought I was saying to short Tesla. I was and still think TSLA outperforms PCLN. So, TSLA is the long and PCLN is the short sale. All the best, Tim
motleifaul
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Thank you for the comment. It really seems that I had misunderstood you. Now the picture also looks more convincing when the Tesla began to move.
timwest
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More upside to this trade. TSLA +8%, PCLN +2% for a net gain of 6% on this trade so far.
timwest
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Today this trade is really moving in the right direction. TSLA is up a couple of percent and PCLN is down. So far, so good.
Perhaps it's better to wait a bitwith the Tesla short entry?