I want to look at Tesla ( NASDAQ: TSLA ) today and this is why: I actually do have a position in this stock, I will tell you what it is in just a second. This chart is a mess, there’s no question about it. Here’s the deal, you can trade to make money, you can trade to be right, or you cannot trade at all. The one that is most important is trading to make money. The dumbest one is to trade to be right. I see stuff like this going on with Tesla ( NASDAQ: TSLA ).
You guys know, I am not going to belabor it, you know what I think of Musk and Tesla ( NASDAQ: TSLA ) and all that, fine, it doesn’t matter. When I look at Twitter ( NYSE: TWTR ) and there are some real “Musk” haters on there, that anytime something bad happens they get all over this thing. And then at the same time the bulls are really quiet. Then when something good comes out, when Musk tweets something or other, the bears are really, really vocal, again, calling BS on it and this and that and the other thing. While the bulls are really vocal saying like, “See, this guy is the Messiah”, etcetera, etcetera.
So what I am saying is, all of that is just bull squat, it just doesn’t matter. But it is a good indication of the sentiment around this stock and around the company. People actually equate one with the other. I am telling you, the behavior of this stock is, you can’t really look at it as a reflection of what’s happening with the company. You really can’t; especially given the fundamentals and everything that is going on with Tesla ( NASDAQ: TSLA ).
The fact that this stock is NOT trending, and frankly, it hasn’t trended for a long time. In fact, really in 2013, it had the big move and I don’t know what it has done as far as whether it has performed or outperformed the market. I suspect it has underperformed, I would say that’s a pretty good guess ( INDEXSP: .INX ) ( INDEXNASDAQ: NDX ). Then we have Tesla ( NASDAQ: TSLA ) here.
What this really reflects to me is the sentiment. This is a chart that is a chart not of the stock price per se, it is a chart about the sentiment around Tesla ( NASDAQ: TSLA ), and it is all over the map. And so I believe that you can trade this stock, forget about being right or wrong, just do it to make money. You can trade this stock without ever looking at the headlines. Totally block out anything relating to “Elron” Musk, Tesla ( NASDAQ: TSLA ), anything else, and just trade this according to levels.
They report on Friday that they cut 7 percent of their workforce. Okay, fine. There are a lot of different reasons that people will say why they did that. But the bottom line is, they cut 7 percent of their workforce; that must be bad, right? Look, oh, my gosh, the bears are gloating, down 13 percent. Oh, $300.00, there it goes, there she goes, $300.00 is going to break. The next stop is $15.00.
So what happens? The stock goes down to 299.73 and promptly reverses. You can just hear the bears still licking their chops. What you should be doing is actually being bullish and licking your chops for a trade. The stock hits 300.00, hits 300.00, hits 300.00 and what happens? It rallies. Why is that when they are cutting 7 percent of their workforce, etcetera, etcetera? Again, without going into the details, you don’t care; you shouldn’t care. In fact, I am telling you not to care.
What’s happening is, there is such a massively high short interest in Tesla ( NASDAQ: TSLA ) that when the stock goes down traders cover, they take their profits. When the stock goes up traders cover because they get shaken out. If the stock starts to go down, maybe they short again, although it’s hard to get a borrow on this; you can do it you just have to pay a lot of money for it. They short again, it drives the stock down, and then it stalls here, probably more shorts. Oh, it’s 300.00; I’m shorting the stock. Boom! They cover. All the while the longs are buying here too. So this is like the ultimate swing trading stock and you don’t need the headlines.
Full disclosure: I am delta neutral on this trade; I did put on a bear put spread today. I bought some puts and then I sold some further out of the money puts. It was more of a delta trade than anything else. My size is how much exposure do I want to have if the stock continues to fall, versus, if it starts to rally back? So I am up nicely in that position. However, and get this, I also get the wonder of Musk (that sounds like a commercial or a slogan for cologne). I get the wonder of Musk, sometime over the next 3 days this guy is going to tweet out something that is going to push this stock back up, you can just bet on it. So here I am flapping in the breeze with a bear put spread on. That’s a debit spread; flapping in the breeze over a 3-day weekend after Elon Musk’s company went down 13 percent. I don’t think so.
Right towards the close what I did was, I bought the same number of shares as the delta that I am short. In other words, it took me to a delta neutral place so that if the stock opens up down on Tuesday, then my stock position, hey, I’ve lost money. BUT my bear put spread is making the equivalent amount of money. It won’t be exactly dollar for dollar but it’s close enough to where I don’t really care, I will trade it either way, I will just trade it either way.
The point of this video is this: Just trade the levels on a stock like this. It would be kind of the same thing with pot stocks because they tend to be so volatile, just forget about the news and just look at this as a stock to buy here at 300.00, a stock to sell at 350.00. As long as it stays in this range, you know what? You’re good. If it falls below this level, hits your stop at 290.00 or whatever it is, make it 4 percent or something, then go ahead and get out of the stock, you’re wrong.
This is a much better way to trade a volatile stock like this. You will make a lot more money than if you sit here like a fool and try to predict when the ultimate demise of Tesla ( NASDAQ: TSLA ) and Elon Musk will happen. I am telling you it is like that old saying somebody said, “The market can stay irrational longer than you can stay solvent.” And I think that’s the case with Tesla ( NASDAQ: TSLA ). There are a lot of people that are going broke trying to be right on this stock, and that would be both long and short. Don’t be a “Teslonian”, don’t be a musketeer, be a chart trader. If the stock is down here at 300.00 buy the stinking thing. If it is up here sell it. Keep doing it over and over and over again. If it was shampoo you would have the cleanest hair in town, lather, rinse, repeat.