UPDATED - JUNE 25, 2018 - MONDAY
Tesla is now at a -12.22% discount from the $373.58 peak on June 18th to the $327.59 intraday low that occurred today. As we showcased back on the June 14th post, when TSLA is in an explosive uptrend, there are more than a handful(s) of pull backs that occur within that uptrend. So far Tesla is down -12.22% within the last 6 days. The study suggests that we're due for a strong near term bounce any moment on TSLA and that a resumption of the uptrend is likely to ensue. Again, refer to these 2 slides to get a sense of what those pullbacks look like during an up-cycle - click on the slides arrow left or right:
However....as you recall in last weeks post we explicated on some reservations on why we needed to still wait as there was evidence that more down ahead was still likely. And so we got an even deeper pullback now to about -12%. Notice in the slides above the deepest pullback during the 2016 rally was a -10.35% pullback and in 2017 the deepest pullback was around a -9% pullback. Here we are in this 2018 rally and we've now gotten a -12.22% pullback. What's more, RSI on the hourly chart is at extreme lows where the strongest reversals tend to pivot: Take a look here on this hourly chart:
We've also now passed through the 9, 21, 50 & now even the 100 EMA (exponential moving average). That's all speaks to discounted opportunity yes...but it also shows that TSLA is behaving off script from what a continuous up-trending rally look like. Which is absolutely fine. It doesn't by any stretch mean that TSLA is done with the uptrend...it just means that Tesla is now more likely to take it's time to cultivate an even stronger breakout pattern. You see those 3 big red PLUNGE bards on the hourly chart? TSLA will have to contend with that selling pressure and to do so requires transactional patterns that come up & come back down ...cycling/chewing through supply & resistance. That takes organic time. I'm not saying this will happen...I'm showcasing what tends to happen. We need to respect the behavior of why & how this happens to begin with.
First off let's step back and acknowledge that Tesla's eagerly anticipated Q3 earnings report where Elon claims Tesla will announce their first quarter of profit isn't until early to mid August. So until then, there isn't much of a catalyst to just assume that the bull run will continue right here, right now. It very well could continue however...and that's fine. We'll be there to catch the upwards momentum one way or the other. But first, I'm looking for a paltry bounce from here ...followed by a retest of the $330 area that occurs on higher RSI. But the bottoming reversal can happen a myriad of different way / cultivations. Bullish divergence is just one angle of consideration in what to look for.
For example, if we get a breakout above $340 on 2 to 3x volume on the hourly chart, that's a very strong variable that the bottom was in on this pullback. That's just yet another example of a "thing" to look for. Again we don't have that yet.
It's very simple here, until conditions ripen...we wait. We're not going to pick off fruit that isn't ready to eat.
UPDATED - JUNE 22, 2018 - FRIDAY
Ok we have *most* of what we've been waiting for on Tesla which is the following...but there is a *but*. First off let's go over the technical requisites that we wanted to first see before considering our reentry on new/other positions:
1) Gap Fill at the $335 area has been achieved as TSLA had an intraday low of $336.36. You recall this week we had reserved caution until at minimum that gap was filled to increase the probability for a resumption of the near term uptrend. That target has been reached. Refer to earlier this week's member alert text where this gap fill image on Tesla was showcased on 6/19/18
2) We have a -10.77% pullback from peak to trough which is historically within range of what we've seen on TSLA pullbacks during strong uptrend cycles. You'll recall we posted this sessions ago which I will repost here
3) And another data point we wanted to see occur is that key moving averages such as the 9, 21, 50, & even 100 EMA (exponential moving average) get tagged. Well those have all been reached.
☒ However, we have 3 giant BEARISH ENGULFING red candle bars which tends to suggest that there is a stronger selling force at play
— Yes it could gap up much higher and reverse all of today’s downside by Monday…but our edge in assuming that is not a viable trade thesis to enter long today. We need to wait for more candle bars to come in to revive the thesis that a resumption of the uptrend will occur on the near & intermediate term trends.
Patience will pay off. BE ZEN & LEARN TO SIT ON YOUR HANDS. I don't care if TSLA goes to $300, $310 or $320 from here ...all the better for us. Either we buy lower or we buy on a clean cut & authoritative breakout after a strong reversal signal occurs. Until then we have no edge to viably assume that the *Bottom is in* ...we don't have enough evidence to arrive at a clean inference just yet.
Stay tuned....we will get there
UPDATED - JUNE 14, 2018 - THURSDAY
Now with Tesla trading around the $355 area as the bullish momentum continues, the value of our January $300 / $320 call spread is now worth around $13.50 from our $7.98 entry. Again, this will be worth $20 which is a 150% gain so long as Tesla is merely @ or above $320 by January 18th, 2019. This was our conservative hedge on Tesla in the event that it kept on running up when we sold our June spread for around a 200% gain last week.
In today's post we're going to discuss our requirements for our reentry for our next swing trade setup. First off, let's acknowledge some key pieces of fundamental news that continue to add tailwind to the upside of everything that has been technically charging on TSLA's chart. Tesla continues to rip higher while we wait for the next "relative pullback" as both the technical & fundamental tailwinds blossom further.
→ Musk buys back $25 million in Tesla shares back from April through May. He was a participating buyer that helped cultivate the bottom. More importantly, this adds further veracity behind Elon's claim that Tesla will be profitable by Q3 & Q4. https://finance.yahoo.com/video/musk-buys-back-25-million-170027588.html
→ Tesla might have achieved battery energy density and cost breakthroughs
“It’s difficult for us to talk about specific cost numbers. It’s a difficult topic, but we are still very confident that we have the best price and performance of anything out there in the world. If there’s anything better, I don’t know about it and we have looked as hard as we possibly can. We try to talk with every single battery startup, every lab, every large manufacturer. We get quotes from them. We test cells from them. If there’s anything better, we are all ears, we want to find it, but we haven’t found it yet.” - Elon Musk
→ Tesla will start rolling out its ‘full self-driving’ package in August, Elon Musk says https://www.theverge.com/2018/6/11/17449076/tesla-autopilot-full-self-driving-elon-musk
Let's discuss our reentry requirements for what we're looking for on our next swing trade on Tesla. First off let me start by saying, we have no edge to be buying near term call options or call spreads on Tesla at this time. We'd be guessing / hoping that our timing / entry on a trade up here at this $355 area would work. We don't want to be buying ANY NEAR TERM CALLS on Tesla *UNTIL WE GET OUR NEXT RELATIVE PULLBACK.* It's that simple. Sure, Tesla can continue to rip higher from here ...and we would gladly miss that particular surge ...which is fine. The risk is that we enter long on near term nitrogen boosters like a July $330/$350 call spread or July $340 calls and then Tesla retests the $330 area after we made our purchase. This is just not the area we want to be entering long on anything NEAR-TERM.
Mind you, this is what we have our January spread for. Our January $300 / $320 call spread is designed to act akin to a SRF (Slow Release Fertilizer) and provide yield to the portfolio over a steady amount of time...that call spread will continue to appreciate in value so long as either TSLA keeps ripping higher or simply stays above $320 upon expiration.
SO WHAT ARE WE LOOKING FOR ON OUR NEXT REENTRY
Now in every bull cycle on TSLA there will be about 2 HANDFULS of pullbacks that range anywhere from -3% to -8% along this uptrend. I've mapped out every prominent bull cycle on TSLA and the 2 main things we will be looking for are the following:
1) → PULL BACKS TO KEY MOVING AVERAGES ON THE HOURLY CHART: TSLA pulls back somewhere within range of the 9EMA & 21 EMA (exponential moving average) ....and even the 50 EMA on the hourly more than 2 handfuls before an interemediate term peak/top is established.
2) → % OF PULLBACK IS ANYWHERE FROM -3% TO -8% / -10% ALONG IT'S BULL CYCLE MORE THAN A HANDFUL OF TIMES.
Backing up, I want you to take a look at what these bull cycles look like and how far they can run for from the trough-low to the peak-top – also take notice that we are now 45% higher from the most recent trough low with TSLA up here around ~$355:
Now let's zoom in on the hourly chart & I want to show you what the small little pullbacks look like along the way up. We will only be entering on a near-term swing trade once we get a pullback within a similar vicinity, contingent upon a few other things that I'm looking for ...but the gist of showcasing these views is this: at bare minimum we will need a pullback within a % decline in share price that converges with a pullback within range of the 9 & 21 EMA ...and even the 50 (exponential moving average). This is very important layer of our analysis but it's not the only data point that we'll be looking for. We'll discuss more on that in a bit.
In early 2017 Tesla ran up 90% in about 2 months. Take notice of how many pullbacks occurred during that runup by both:
→ Tagging the 9 to 21 EMA (exponential moving average) &
→ Take notice of the % decline of each of those pullbacks that ensued.
Then notice of the subsequent rally to new highs after each of these pullbacks that occurred:
Ok now let's look at another monster rally which was the run-up of early 2017 when Tesla ran up 60% higher within 72 days and even later netted 115% higher in 200 days. Focusing in on just that 72 day period let's take a look at the hourly chart. Again we have 10 pullbacks that occurred just like 2016 all of which tagged either the 9 EMA to 21 EMA ...even better is going lower yet to the 50 EMA. Now this is VERY IMPORTANT TO DISTINGUISH: Tesla most assuredly can & very likely will tag that 50 EMA again. And it's precisely this kind of pullback cycle that we want to be taking advantage of...take a look:
The evidence here is clear....we want to wait for a pullback & then more importantly a reversal which I will hone in on using much smaller time frames like the 5min, 10min, 30min chart along with layering the actual options call chart in TOS. Just like in TSLA's share price chart pattern, the option contracts themselves perform similarly when indicators are applied to the contract's graphs. We want to see a bullish crossover on both stochastics & MACD momentum indicators on not only TSLA's share price chart but also the OPTION CONTRACTS themselves that we'll be utilizing for our reentry. We'll define which contracts we're scouting & considering as we get closer.
For now, if TSLA keep running higher from here ...then that's what our January spread is for. It's a hedge to give us exposure to the upside no matter. Be patient here...TESLA will inevitably pullback on the near term. It may not be as sweet as a pullback to the 50 EMA but let's wait to see what things look like once we get back to the 9 EMA at bare minimum from here.
UPDATED - JUNE 12, 2018 - TUESDAY
$TSLA UPDTE: We have a new trade setup on TSLA that's starting to ripen. While our January $300/$320 call-spread is already up over 60% in value ...that will continue to act as our hedge towards upside risk & mature to a gain of 150% by January expiration so long as TSLA is merely above $320/share.
The June call-spread that we sold @ for a ~200% gain was like a quick-release fertilizer. It's like a nitrogen booster for your fruit yield, right? That gave us bigger blooms to capture more sun so our Fruit tree can grow into the following seasons. But if you over fertilize your garden/tree/portfolio, then you risk burning your trees/portfolio. That's why we have weighted part of our portfolio into the January call-spread.
Think of the January call-spread like our slow-release fertilizer. You don't fertilize the entirety of your portfolio with all quick-release (near term & more aggressive call options). We will scout monthly nitrogen boosters to boost up the portfolio along the way when the feeding / setup is right. If the conditions are not right or ready...then we wait. Well...I'm getting more excited by the day on TSLA is we're a whole new opportunity is starting to now setup. In the meantime, our January $300/$320 call spread will act as a slow release fertilizer in producing steady yield & price appreciation.
→ MEMBERS WILL BE EMAILED & TEXTED THE NEXT TRADE SETUP AS IT RIPENS. COMING OUT LATER TODAY.
Now why did we go long on TSLA when we did? We laid out a compendium of evidence on how Tesla was BUILDING CAUSE to launch higher. One angle of data that was presented to the jury was a Member's Alert showcasing this image & excerpting the reasoning why this was just yet another important data set that needed to be considered in our game calculus. We looked at something called the "% distance below the 100 day moving average." This was not the only reason why we want long but it was a compelling data point that was considered. Here is that image from April 4th, and then below it is the updated view:
April 4th daily view:
June 12th daily view:
And as of today we have a clear cut breakout as TSLA is well on it's way to a retest of the highs, now 45% higher since April.
Congrats everyone on TSLA - our January $300 / $320 call spread is now worth around $13 which is a 62% gain from our $8 entry. Remember, this position will increase to a maximum value of $20 so long as TSLA is above $320 by January expiration. If TSLA went sideways or even down from here no less than $320 ...it would make no difference to this position ...it will mature to a ripe value of $20.