Tesla Inc (NASDAQ:TSLA) is poised to tack on even more to its additional gains in September. TSLA stock struggled in early July, as Model 3 hype created a sell-on-the-news event heading into its second-quarter earnings report. However, shares have recovered nicely since the Q2 announcement, and bullish sentiment is beginning to build once again that could send shares soaring.
This time around, the pressure is building overseas.
Peter Altmaier, German Chancellor Angela Merkel’s chief of staff, said over the weekend that he was disappointment in German automakers for falling behind.
“When is our automobile industry, which is so good, actually going to be in a position to build a car that travels 50 kilometers further than a Tesla and costs 10,000 euros less? It must be possible to set this as a goal.”
There you have it. You know your car company is doing something right when Germany sets your vehicle’s performance as a goal to be topped.
Charts, Sentiment and Options
TSLA stock, meanwhile, is currently in the process of working off the recent collapse of excess bullish sentiment. The shares’ setback in July was largely due to profit taking following the successful — and on-time — launch of Tesla’s Model 3. With those speculators now out of the way, Tesla is free to resume its former trend higher.
Click to Enlarge Technically speaking, TSLA has found a floor at its rising 20-week moving average. This trendline has bolstered the stock since December, and provided key support for the shares in the wake of the Model 3 launch selloff. Tesla now is bouncing around support/resistance in the $350 region, and a firm breakout here means Tesla price action should once again turn steadily higher.
As for sentiment, quite a few naysayers remain on the sidelines.
For instance, Thomson/First Call reports that 14 of the 26 analysts following TSLA stock rate the shares a “hold” or worse. What’s more, the 12-month price target of $317.29 represents a discount to Tesla’s Friday close. Upgrades or price-target increases could provide buying fuel for the shares.
Short interest is also a potential driver. The number of shares sold short remained steady during the most recent reporting period, with about 38% of Tesla’s float currently sold short. A resumption of the bullish uptrend could create more pain for these bears, leading to capitulation and an eventual short-squeeze play.
Turning to the options pits, we see that short sellers aren’t worried at all — and that could be their undoing. Currently, the September put/call open interest ratio stands at 1.52, with puts easily outnumbering calls among near-term options. With short sellers not hedging their bets with calls, any abrupt breakout for TSLA stock could force a sharp short-covering rally.
Overall, September implieds are pricing in a potential move of about 6.3% ahead of expiration. This places the upper bound at $372, while the lower bound lies at $328.
Let’s look at a pair of trade ideas for the current setup.
2 Trades for TSLA Stock
Call Spread: Traders looking to capitalize on a continued rally as Tesla recovers from its early July weakness might want to consider a Sep $365/$370 bull call spread.
This spread was last offered at $1.46, or $146 per pair of contracts. Breakeven lies at $366.46, while a maximum profit of $3.54, or $354 per pair of contracts, is possible if Tesla stock closes at or above $370 when September options expire.
Put Sell: For a more neutral-to-bullish play, the Sep $300 put sell has a good chance of finishing out of the money.
At last check, this put was bid at $1.03, or $103 per contract. In this trade, you keep the premium as long as TSLA closes above $300 when September options expire. On the downside, if the stock trades below $300 prior to expiration, you could be assigned 100 shares for each put sold at a cost of $300 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.