Tesla's rough road continues.
Tesla (TSLA) - Get Reportsold off pretty hard on Friday, giving up nearly 9%. I'm not going to lie to you, I gave serious thought to buying the name late in the day. In fact, trying to figure on where to buy this troubled name is what I spent too much of my time on as the day expired. It was not long ago that Tesla equity holders were all over social media taunting the shorts in the wild aftermath of CEO Elon Musk's now famous tweet-storm that made headlines a couple of weeks ago.
Being one who shorted the name that day (and the next), I know. Some of that hate came my way.
What the Musk-faithful do not understand is the trader only hunts. We are mercenary in nature. Just as likely to make a purchase as we are a sale. Only probabilities of risk/reward matter. Oh, do not get me wrong.... I do invest. Just not in Tesla.
By now, you've all read the horrific Elon Musk article published in the New York Times. Musk speaks of a constant state of exhaustion. His personal alarm seems multi-directional. Easy for us to dismiss. 120-hour work weeks. A 24-hour shift on his birthday. Things that we have all have to do at times, but that we also do complain about. Mental exhaustion is a very real thing. I can almost feel for Musk. Compassion, however, is not a reason to buy anything.
- Tesla Gets Major Price Target Slash From JPMorgan After Rough Weekend
- Here Comes a Tesla Roadster and a New Stock Market Record: Week Ahead
On Friday morning, UBS analysts questioned the potential profitability for the firm's Model 3 at it's target price of $35,000. The versions of this vehicle currently available range in price from $49,000 to $80,000. The UBS report states that these more expensive versions do indeed make money, but at $35,000, the firm would lose $2,300 per sale. The UBS analyst who authored the note, Colin Langan, feels that Tesla may be headed for the firm's best quarter due to these factors, but that the condition is not sustainable.
Obviously, I covered that short too early. Made some lunch money, when it could have been a night (or several) on the town. Being flat, the question is now, where to, or do I get long? Maybe. The Feds are still looking at these guys.
More Bad News
News broke over the weekend that the Saudi Arabian sovereign wealth fund that Elon Musk might have been looking to for help on taking his firm private is talking to Lucid Motors, a privately held manufacturer of electric vehicles. In other words, a Tesla rival. Lucid is not yet selling its vehicles. As far as one can tell, the firm has been accepting refundable deposits and expects to start building these vehicles later this year.
The possibility of the Saudi investment is just that, a possibility. Terms have been drawn up that reportedly could have the fund investing more than $1 billion in several increments. According to Yahoo Finance, the later increments would be reliant upon certain production goals being met. Does this mean that the fund is unable or unwilling to get more deeply involved with Tesla? That is impossible for us to know at this point.
Uber board member Arianna Huffington also blasted Musk on Twitter for not getting a lot of sleep. Watch her discuss why sleep is so important below with TheStreet.
One thing you need to know is that you don't need to do this. In fact, I often tell you when we discuss trading that I am in the foxhole next to you. With this one, just as a heads up, I may not be.
First, let's make this clear. I don't short naked options in either direction when it comes to highly priced, money losing firms that the SEC is watching, whose most attractive asset is a large short interest. Just too dangerous.
However, as an instrument of speculation, meh. You never know. What I do know is that the trade would merely be for sport. I'm not risking the house, or even my next meal. The stock went out at $305.50. The pajama traders have knocked it down below the $300 level this morning.
The name is now a falling knife. The daily MACD went negative on Friday. Money Flow and Relative Strength will likely send negative signals once the shares open for trade. There are two levels for me to watch. The $298 level is key. That's a 61.8% retracement of the entire 2018 range. Support there would be a third consecutively higher low. Not exactly an "ascending base" for a number of reasons, but still something that could be taken as a technical positive. A crack of the $298 level would allow for the stock to approach the $284 level (The stock was hitting $294 as this article was being published). That would be a 100% retracement of the July through August ramp.
Like I said, nobody needs to do this. We took advantage of euphoria two weeks ago. Can we scrape a little something off of the bottom as well? I don't buy a share above $284, if I act at all. If the stock never gets there, I'll live. If it gets there too fast, I may just "pop smoke", and head for $250.
Keep one thing in mind, if it ain't fun, don't play.
Free White Paper: 7 Things All Investors Must Know in 2018. Start the second half off right with our free white paper on seven key things to watch this year. From how much cash to have on hand to the three reasons this bull market might die, our white paper features key takeaways from an all-star panel that TheStreet and Fisher Investments recently hosted in New York. Click here to register for your free online copy.
At the time of publication, Guilfolye had no positions in the securities mentioned.