TSLA has been one of the most controversial stocks this year. There have been some serious doubts about Elon Musk�s ability to get the company profitable in the future. TSLA surprised everyone with their earnings results (or at least how the market interpreted them), and the stock had a huge squeeze last week. �Despite all of the concerns behind the fundamentals of the company, the stock is approaching all time highs near 400�s. Musk added more fuel to the fire by saying he is considering taking the company private at $420 a share. All this news created some great momentum in TSLA stock, and we had some great day trades on it. Here is a video recap of how we traded TSLA last week:https://www.youtube.com/watch?v=fdsxGiPORFw
HUGE Short Interest
TSLA was on my radar last week after it gapped and it ran in response to better than expected earnings results. TSLA has a enormous amount of people short the stock, with over a quarter of the float short, according to shortsqueeze.com. This means when the stock gaps up and breaks out like it did last week, there will be a lot of people underwater and possibly looking to exit their position.Many people are daunted by the share price of TSLA, and don�t day trade it because they perceive it to be too expensive. The share price of the stock doesn�t matter when you are looking at something to day trade, its the range it has. It has a 20-30 point range on some days. Even if you only by 50 shares of it and you only capture 10 points of the range, you will still make $500. �
VWAP Pullback
The VWAP pullback was the setup we used the other week to trade IRBT. We used it again to get a low-risk high reward entry on TSLA. It is one of the best setups to use for afternoon trading. I missed the opening move on TSLA, and I didn�t want to chase it. I finally got the pullback to VWAP and I took a long at around $360, and sold it on the spike towards $370. Unfortunately I didn�t hold any shares through the new halt! Learn more how to trade VWAP pullbacks in this article here.
Always Respect Price Action
TSLA in the past several years is a great example of the importance of respecting price action. The company is not profitable, and there are reasons to think that the company may never be profitable. There is a good fundamental reason to be short the TSLA stock. But there is no technical reason. Take a look at its weekly chart:
The stock is in an UPTREND. You can see how every dip gets bought up. You don�t short stocks in a strong uptrend, at least for extended periods of time. Wait for the backside and join the trend, instead of trying to pick a top. There are plenty of junk companies that continue to run despite having questionable fundamentals. You cannot short something just because it has questionable fundamentals. You need to align it with a technical pattern, so you know there will be a high probability of there being more sellers than buyers so that the stock will depreciate in value. Not respecting price action as a short seller is the easiest way to blow up your trading account.What are your thoughts on TSLA? Tweet me and let me know.
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