Even though I am not a fan of Tesla (NASDAQ:TSLA), I have no trouble trading it from the bullish side. Clearly the bulls are in control as TSLA stock is up almost 100% this year. They can drop-the-mic and walk away with swagger. At a time when the whole market success is in debate, the stock continues to reward its owners in a big way. It always spurs fiery debates, but emotions cause trading mistakes, so it’s important to sideline them to make better calls.
Case in point? When everyone on Wall Street treated it like a leper less than a year ago, I wrote about betting long on it under $200 per share. Since then, sentiment has flipped to positive again, and this year, investors went bonkers and they and cannot get enough of it.
Therein lies the opportunity with TSLA stock for today. They made a mistake at the lows and they could be making a mistake now. Cautions is of the essence at these levels perhaps more so because of the macro-economic conditions than intrinsic problems.
Those who are all-in for the long haul need not worry about these shorter-term comments today. Some even expect the price of TSLA stock to reach $10,000 and I don’t argue with them either. Meanwhile, here there is too much blind love for thr stock from a trading perspective. Don’t confuse this with a mega-bearish note against the company or its prospects. I am merely pointing out shorter term trading opportunities and seeking better entry points.
But first, we have to deal with the elephant in the room and that is CEO Elon Musk going back to old habits. He is now tweeting controversial subjects again and that is cause for anguish for investors.
TSLA Stock Stuck in the Middle of a War of Words
Don’t get me wrong, I have been an employer in California, so I know how frustrating it can be. I am on his side in this recent squabble. The rhetoric heated up after he tweeted that Tesla would leave California effective immediately and I don’t blame him. But this course of action is inevitably going to elicit the wrong responses from Sacramento. If you want evidence of how much emotions he can stir, just consider the Twitter response he got from assemblywoman Lorena Gonzales. She had her own tweet faux pas, where she cursed Elon Musk. I don’t let politics influence my trading, but in this case I am making a simple point. Musk is now again a headline threat to TSLA stock. So finding proper levels is even more important than any time this year.
Luckily, Tesla’s fundamentals are as strong as they have ever been, even better than Ford (NYSE:F) and perhaps General Motors (NYSE:GM), especially from a cash flow perspective. Ford and GM stock are down 40% year-to-date for comparison. While the valuation is still very expensive, that alone is not a deal breaker. Because the consensus is that Tesla is not a car company. For now, I accept this notion until further evidence against it.
Despite of the weekend twitter fight, TSLA stock fell only 1% on Monday and it is back up in the green again today. So maybe this time Wall Street won’t mind as much if Musk misbehaves on social media. The danger comes from the legislators if they revisit the terms of the settlement from his last bout with the “funding secured” flub of 2019. The Tesla board is supposed to sign off on the CEO tweets that involve financials. Recently, the stock tanked 15% on his tweet that his stock was too high. That is one financial bit of information that the board did not likely approve.
Use the Charts for Guidance When Logic Is Scarce
Luckily, investors can use the charts to guide trading until they settle the score. Above $774 per share, and the Tesla bulls remain in charge. This was the last breakout neckline, so they can use it to breach the resistance above $861. The short squeeze from February and subsequent failed retest a month later will stand as the high mark to beat, and a tough test at that. All of that means it will take a lot of force to set new highs.
Unfortunately, Tesla just reported great earnings given the circumstances, so that catalyst is done. Now the tug of war will continue on Wall Street until the next new wave of headlines. Neither the haters or the devout worshipers will ever admit defeat, so this battle will be a see-saw for years to come. Given that it is now almost four times the price it was a year ago, I’d say advantage goes to the TSLA stock fans.
Ideally, I prefer entry after a dip to $680/$720 per share. Otherwise, I’d wait for a breakout from $873 per share because that would trigger a bullish pattern that could set new all time highs.
I have to admit that I enjoy seeing big businesses square off against their host cities. Like Amazon (NASDAQ:AMZN) CEO Jeff Bezos did with New York last year for his second headquarters. I am on team Musk with his suggesting leaving California. But there is also the growing concern that if this actually happens, moving production facilities is a costly matter. Even if they only move its support staff not the actual plant, this surely would create inefficiencies from the new distances between the front line teams and their corporate support. This is perhaps a slightly smaller problem now, as the world is getting used to using Zoom (NASDAQ:ZM) like services.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
