I believe in Tesla long term and disagree 100% with the bear case about this company.
That said, this is going to embark upon something I tend not to do (or write about) and that is trading.
Tesla is on a heck of a run and at the shorts lunch. One of the most heavily shorted companies staged a rally that was more than just a bear trap. The market, in my view, is finally grasping, at least to a degree, what this company is doing.
That said, shorting is a technique that involves timing of the market at certain intervals. Now might be a time where we are at an interval where profit taking is on the table.
Let us look at the 3 month chart.
That is more than an impressive run. To go from $250 to $405 in under 90 days is powerful. Of course, there were some powerful moves at different intervals during that quarter.
But it gets a bit worse for the longs.
Here is the 30 day chart.
This is even worse than the 90 day chart. The move up was is cause for concern about being overextended.
To top it off, this week the stock rose 13%.
It seems the trend is in place. The most recent moves are calling for profit taking.
Hence, one might be apt to put a short in place. This could be done with puts if one is into that.
I would look for a $415 stop loss with a target move down in the $380. This will provide a decent risk/reward ratio while providing a nice exit if the stock does still run.
The way Tesla is moving, I don't think this will be a trade that takes a lot of time. It could drop into the targeted zone in a week or so.
Either way, I would view this as a trade, not a long term move. The shorts are getting hammered of late and it does appear this company has turned the corner. There might be some opportunities in Q1 for the bears but, overall, this is a bullish story.
That said, markets do not go straight up. A trade like this could mean some quick cash if it proves correct. Short term moves of this magnitude are, inevitably, met with profit taking.
Images from Yahoo finance.
This is for educational purposes only and not a trade idea.
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