TSLA 

I want to look at Tesla ( NASDAQ: TSLA ). I’ve got a lot of lines drawn here but I am going to take some of them away because they’re really not relevant. What is relevant to me is this, this was a high volume breakout day; really big volume. I think the most volume was at 47.7. What did this have? A little bit more back here as Tesla ( NASDAQ: TSLA ) hit these capitulation lows.

So there’s a lot of buying going on here, and who knows whether it’s in response to Musk saying that they have dumped 75 percent of their Bitcoins, which gives them more fiat currency, otherwise known as worthless pieces of paper. But people seem to like that so, hey man, why not? They’ve got a bunch of it, it really frees up a lot of cash for them. Maybe it is because of that, I don’t know.

The stock is up significantly, about 10 percent today, which by the way, if you are trading options that’s not too bad. If we look at what happened today, I like to look at these things in the format of zig zags. Up and back, and up and back, up here, and then this just kind of keeps going. This is the way that a strong stock works.

If you look at this, and typically this is how professional traders will look at something. If a stock gaps up a lot, if they are short the stock, it’s like Tesla ( NASDAQ: TSLA ) is up this much, I will sell into that. I will put some supply into the market because I think it is up too much, and so somebody shorts the stock. Then they are going to wait and then about 10 or 15 minutes into the trading day if that stock is not below where the opening print was they are going to pivot, close out their short for a loss and go long.

That is just the way the market is going to work. You see, professional traders don’t take big losses, which is why they are professional traders, so they are not going to stick stubbornly with a stock if it is going against them. They will say, okay, well I was wrong on that. The only way I can be right is if I admit I am wrong and go the other way. So that is one dynamic.

Now, another dynamic is just the opposite. If the stock gaps up and you say, I’m going to buy this stock, so you buy the stock. Well, 10-15 minutes into the day the stock is below where you bought it then you have to say, well I bought this gap and got faked out. I got sucked in, I will go ahead and close that out. And then that is what you do, live to trade another day.

What I suggest doing, it’s a little bit harder to do when you are actually in the trade because then there is emotion involved. But look at the first 15-minutes. Look at the first 15-minutes of the day, and where is the stock trading? Here’s the open, does it just continue to go up? If it does, if it is, then this is the time during which professional traders would have made their decisions as far as what they are doing for the day, and which way they are leaning.

Am I going to be long the stock or am I going to be short? They are not really just day trading, they are building a position. And so when you see the stock in this frame here like this or even just like this when you see it you need to be green. If you see it down here and it’s in the red, well, that is kind of a different deal, isn’t it? If it starts eking into this area here then you don’t want to be long the stock, it’s a fake out.

This is a really simple rule that will help you stay on the right side of the trend. You can use this for every single zig zag in this chart. But just know this, at some point the stock is going to kind of be done going up during one trading day, it just so happens that it was during the lunch hour here. So if you are going to be taking this kind of trade you have got to be early, that’s all I will say.

TSLA QLD 

I’ve got a real sloppy chart of Tesla ( NASDAQ: TSLA ). The company reported earnings. I don’t care what they were, I didn’t even look at them, I just see the stock. It is flopping, bobbing, and weaving all over the place. A big move higher as the lemmings rush in, they probably saw one great number and decided it was time to buy. And now the stock is right back, essentially, to where it was when it closed. This is a stock that, right now, is still stuck below 750.00.

Now, I know that you are really, really eager to buy Tesla ( NASDAQ: TSLA ) because you don’t want to miss it before it runs back up and everybody else gets rich except you. However, I wouldn’t suggest doing that right now. My only suggestion is this, you have got to respect this 750.00 or even 760.00 level. It has capped every single rally that this has had, since May when it did put in a bottom that really does look like about 630.00.

So I think you have got to just sit tight on this for a while. I wouldn’t own it, there is no way I would own this stock right now. Not because I think it’s going lower, but because I don’t think it is really likely to go much higher, at least not enough to pay me off for owning this stock as opposed to the QLD ( NYSEARCA: QLD ), I like this better. I get Tesla ( NASDAQ: TSLA ) and, oh, so much more.

We’ve got this on our Active Trade List now, consider the QLD ( NYSEARCA: QLD ) over TSLA ( NASDAQ: TSLA ). I think you are going to make more money. You probably won’t have as much fun but will make more money.

BM QQQ 

I want to look at IBM ( NYSE: IBM ) here. Yesterday I had mentioned that after the stock really, really tanked that it was setting up a potentially good bullish snapback trade because it was so far below 3 standard deviations, which you can see by this line here. It is so far below 3 standard deviations that in instances like that it’s only a matter of time before they reverse.

It didn’t do that first thing this morning, you can guess this, it traded down. But then once it peaked, as far as downside pressure, then this just kind of started drifting higher. And then after 2:00, that’s when it moved with, shall we say, a little more decisiveness. But it took it a while longer to get going than some of these other ( NASDAQ: QQQ ) tech stocks.

So where are we now on IBM ( NYSE: IBM )? I still think that the stock will ultimately run higher here. Tomorrow, I had said if it is above 132.00 that would be your go point. And I will actually still say this, you can look at things this way. Look at $130.00 as the line in the sand. If this move is going to work, and I do believe that it will, if this move is going to work it shouldn’t fall below 130.00.

That is a super low risk. You can even keep your stop below today’s intraday low and you are risking less than 3 percent. That wouldn’t work for me because of the type of trade this is. The way this trade is structured, I’m looking at this as a snapback. And if I am correct then the stock will not move down over 2 percent the other way.

The only way the stock would move down to hit my stop is if I was wrong on the trade. Well, I don’t know why I would stick with the trade after I knew that it was going to be wrong. So I would just suggest keeping a tighter stop on this, but I like the setup for tomorrow.