Here’s my look at the market…and the trade on Tesla – October 4, 2023
This is Dan Fitzpatrick with FITZ IN FIVE. I am looking at Tesla ( NASDAQ: TSLA ) here, but before I do let’s look at the overall market.
We will start with the SPDRs ( NYSEARCA: SPY ) here. A nice move higher today, not a big deal, .7 percent. We could kind of expect this, a rebound off of the 200-day moving average. You can see it here on the SPX, it still tested the 200-day. This fear index is at 17, which means, like holy crap, we’re all going to die, kind of thing. This was definitely not a good thing.
We will start with the SPDRs ( NYSEARCA: SPY ) here. A nice move higher today, not a big deal, .7 percent. We could kind of expect this, a rebound off of the 200-day moving average. You can see it here on the SPX, it still tested the 200-day. This fear index is at 17, which means, like holy crap, we’re all going to die, kind of thing. This was definitely not a good thing.
The percentage of stocks above their 40-day moving average ( T2108 ). I tend to look at this on a line chart, that’s an intraday by the way, you can see where this trough right here at 10:30. It’s like a buy program went off at 10:30, and you will see that happen. We can look at, ( T2107 ) my bet is, and 10:30, bingo, there it is, 10:30 again. So it is like a buy program came in and started taking all of these stocks higher.
This is just something that you need to be aware of. It is kind of a fine point, but when you look at this on the daily chart you can see, here we’ve had this big massive sell-off. And virtually every time we get down this low, look at the red line. When we get down this low we do see buying coming in.
And so, this is why I mentioned yesterday when I said that I think we have a tradeable bottom here. We’ve got a tradeable low, somebody goes, Oh, you’re guessing. Yeah, I’m guessing based on almost 30 years of experience looking at the market. And just remembering what I have seen in the past.
However, with that said, and it’s really important, it seriously still is a guess, it is not a definitive statement. And so don’t get the wrong idea about what I am saying or about your own abilities. You look at historical precedent, you understand why, and you understand the dynamics of what happens when things get this oversold.
And it would be the same thing on the upside, by the way, but when things get so dislocated that everything seems like it’s going to zero. In instances like that, you want to be thinking back and saying, Well, wait a minute, the last 6 times things have been this way and it seems like everybody needs to run for the bomb shelters or the bunkers, that’s actually been a really good buying opportunity.
That’s all it is, and so you look at this and say, Okay, the conditions are ripe for this kind of move. Okay fine, with that said though, we don’t know how high this, ( I’ll go back to the S&P 500 ) rebound is going to go. My guess is that this at least goes to 4,300.00, but I can’t say beyond that because every single little rally we have had ultimately winds up lower.
So you have to assume that this is going to be the same thing. It might not be, but you don’t want to be betting on that. And I will just say this, if this is truly a low, you will know it because the price will continue to go up. But so far, all this is, is a snapback rally off of an extreme oversold condition. It doesn’t mean that this is the absolute low.
Also, and this is important, all these other lows were not bouncing off of a really, really key moving average, the 200-day moving average. But if you look at where the SPY ( NYSEARCA: SPY ) went, that went down not even 9 percent, from the very top. So you can’t say that we are in a bear market here, we’re not. I might feel that way if you bought at the top, but as long as we are still up above the 200-day moving average. In general terms, you can just say, Okay, buy them.
And so the question you have to ask yourself is, what am I going to buy? And also again, how high up are you going to run? Is this going to be a big move or not a big move? I think that is the type of thing where you have got to take it one day at a time.
With that said, you look at Tesla ( NASDAQ: TSLA ). They have a bad deliveries number, as far as what the market was expecting, and like, 15 minutes later Musk goes, “Hey man, we are reducing the cost on our Model 3s, it’s all going to be good. And so, in my view, that’s one of the reasons the stock is up 6 percent today.
I like the fact, this is not a great setup because of this downdraft here. However, there aren’t that many great setups around but I like this one. We got into a bullish option position today: we should have just bought some calls but I didn’t. You can buy the stock right here and give yourself a 6 maybe a 6.5 percent risk on the downside. And then look to make about 6, maybe a little bit more, percent on the upside. So you are essentially risking 1 to make 1.
That is not the best risk/reward but I think it will work. You can, at the same time though, say, do you know what, I like the way this is trading but if this thing falls back below the 50-day moving average I’m out of here because I have seen this before. So you set it at 249.50 or 249.60, something like that. And then you’ve got an even lower risk.
Other than this, frankly, I don’t see a whole lot of things to do in the market. I think this is a wait-and-see market, that’s what I am doing, and maybe that is what you should do too.
The percentage of stocks above their 40-day moving average ( T2108 ). I tend to look at this on a line chart, that’s an intraday by the way, you can see where this trough right here at 10:30. It’s like a buy program went off at 10:30, and you will see that happen. We can look at, ( T2107 ) my bet is, and 10:30, bingo, there it is, 10:30 again. So it is like a buy program came in and started taking all of these stocks higher.
This is just something that you need to be aware of. It is kind of a fine point, but when you look at this on the daily chart you can see, here we’ve had this big massive sell-off. And virtually every time we get down this low, look at the red line. When we get down this low we do see buying coming in.
And so, this is why I mentioned yesterday when I said that I think we have a tradeable bottom here. We’ve got a tradeable low, somebody goes, Oh, you’re guessing. Yeah, I’m guessing based on almost 30 years of experience looking at the market. And just remembering what I have seen in the past.
However, with that said, and it’s really important, it seriously still is a guess, it is not a definitive statement. And so don’t get the wrong idea about what I am saying or about your own abilities. You look at historical precedent, you understand why, and you understand the dynamics of what happens when things get this oversold.
And it would be the same thing on the upside, by the way, but when things get so dislocated that everything seems like it’s going to zero. In instances like that, you want to be thinking back and saying, Well, wait a minute, the last 6 times things have been this way and it seems like everybody needs to run for the bomb shelters or the bunkers, that’s actually been a really good buying opportunity.
That’s all it is, and so you look at this and say, Okay, the conditions are ripe for this kind of move. Okay fine, with that said though, we don’t know how high this, ( I’ll go back to the S&P 500 ) rebound is going to go. My guess is that this at least goes to 4,300.00, but I can’t say beyond that because every single little rally we have had ultimately winds up lower.
So you have to assume that this is going to be the same thing. It might not be, but you don’t want to be betting on that. And I will just say this, if this is truly a low, you will know it because the price will continue to go up. But so far, all this is, is a snapback rally off of an extreme oversold condition. It doesn’t mean that this is the absolute low.
Also, and this is important, all these other lows were not bouncing off of a really, really key moving average, the 200-day moving average. But if you look at where the SPY ( NYSEARCA: SPY ) went, that went down, not even 9 percent, from the very top. So you can’t say that we are in a bear market here, we’re not. I might feel that way if you bought at the top, but as long as we are still up above the 200-day moving average. In general terms, you can just say, Okay, buy them.
And so the question you have to ask yourself is, what am I going to buy? And also again, how high up are you going to run? Is this going to be a big move or not a big move? I think that is the type of thing where you have got to take it one day at a time.
With that said, you look at Tesla ( NASDAQ: TSLA ). They have a bad deliveries number, as far as what the market was expecting, and like, 15 minutes later Musk goes, “Hey man, we are reducing the cost on our Model 3s, it’s all going to be good. And so, in my view, that’s one of the reasons the stock is up 6 percent today.
I like the fact, this is not a great setup because of this downdraft here. However, there aren’t that many great setups around but I like this one. We got into a bullish option position today: we should have just bought some calls but I didn’t. You can buy the stock right here and give yourself a 6 maybe a 6.5 percent risk on the downside. And then look to make about 6, maybe a little bit more, percent on the upside. So you are essentially risking 1 to make 1.
That is not the best risk/reward but I think it will work. You can, at the same time though, say, do you know what, I like the way this is trading but if this thing falls back below the 50-day moving average I’m out of here because I have seen this before. So you set it at 249.50 or 249.60, something like that. And then you’ve got an even lower risk.
Other than this, frankly, I don’t see a whole lot of things to do in the market. I think this is a wait-and-see market, that’s what I am doing, and maybe that is what you should do too.
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