TESLA appears to be charging for giant move

Unless you were living under a rock or an investor that only puts your money in a mattress you would have noticed the giant run Tesla Motors ($TSLA) has made in 2014. Year to date, TSLA is up 64.84 percent. In the last year alone, TSLA is up over 500 percent. From what I see based on a technical standpoint, TSLA may just be getting started. Let me explain.

Capture

First, TSLA chart is a classic example and a thing of beauty for what you want to see stocks do after making massive runs. After gaping up on 2/25 and putting in the high just short of $265 in the morning of 2/26, TSLA is consolidating high and tight. When TSLA finally showed signs of cracking on the morning of  3/3, dropping to 234-237, buyers emerged, TSLA rejected the lower prices and reversed higher to finish green in the day. Recall, the first day of March, included a gap down in the averages with a Putin vengeance. TSLA finished green and in context of the gap up and market, made a strong statement. 

Since then,TSLA grinded slightly higher, testing the $260 level but was met with by sellers. TSLA has continued to be range bound with extreme contraction of volume and volatility relative to the action in the last few weeks. From a price standpoint, this is exactly what you want to see following a breakout. Clear contraction of volatility and volume. With the volume contracting and the price staying up, the chart is showing the characteristics of sellers slowly drying up. As a result, it is becoming increasingly likely that TSLA is gearing up for a continuation move.

tsla recent

However, what truly makes TSLA still a special opportunity on wall street after such a run up is more psychological. As of 2/14, TSLA had a massive short interest (30%+). Since then TSLA is up 50 points or so. However, I still suspect there is still a good amount of shorts who stubbornly have not covered.

CaptureSI

From a psychological standpoint, when a big group of the street is on one side of a trade, opportunity is at its greatest to squeeze the other side. While many of you may say that everyone is bullish on TSLA, a look around social media along with the short interest would say that there is plenty of opportunity for the stock’s sentiment to even become more bullish. When the market senses a large group on one side of the trade, especially one in a vulnerable position such as those who are short a stock making multiple all time highs, wall street usually goes after blood.

You can bet that there are many people with more money than you and I have combined waiting for updated short interest numbers on TSLA. Short Interest for TSLA through 2/28, will be out 3/11 after the close. This will reflect the number of short shares in TSLA even after the giant gap up on 2/25. You bet giant pockets will be curious to see this number and I would not be shocked at all to see the price action squeeze higher based on the data.

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5 thoughts on “TESLA appears to be charging for giant move

      • Very interesting, I’ve never done much with debit spreads, learned about them at one point in my time with Investools but never did many.

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