Friday, July 7, 2017

You're The Boss. What Do I Do With Tesla Stock?

What do i do with Tesla stock
Tesla Model 3 Is All That Matters
Need Some Answers On Tesla

Let's look at the reality of media and its calls. We put out a call that we loved Tesla at $302 on April 5th of this year. The stock ripped higher into the $380s about a week-or-so ago only to take a beating based on 1) low end of estimates for Q2 deliveries, 2) a Goldman report that was bearish citing slowing Model S sales, and 3) a negative crash test report.


How Our Calls Differ Than Your Typical Media

What's different about what we're doing and what the typical media is doing is we want to have a realistic profitable gameplan in mind, your gameplan.

That means if we said something good and something negative happened we are assuming you are leaning on us to some degree and want answers.  Most media reports ups and downs, gets you excited or bearish, but they don't back it up. In fact, if you entered on every bullish call and exited on every bearish call, your trading account would be Swiss cheese.

That's why we want to track every call we make and make a decision on every call. (See Stock Picks)

Typical hedge fund thinking is every piece of news should help you make a decision. So we want to take that same approach here. If we say something we think it should in some way direct you to some degree to make a profitable decision.

Your The Boss, You Need Some Answers, "What do I do now with Tesla?"

what should i do with tesla stock now that its down
Your the driver. What do I do now
in Tesla?
If I was your analyst and you were the hedge fund manager and the stock just dropped in our face big time, you need some answers.

Let's make a gameplan.

First, I hate the stock coming in on me from $380 to $315 (premarket today). Hate it!

We need to hate losses and love profits!

We need a simple gameplan. I have one.

If Tesla stock opens or closes below our entry $302, we're gone. Simple.

Why the exit strategy? First we thought that the 25% short interest would help catapult the stock as the Model 3 becomes a reality. That's about to happen as the Model 3 starts to meet its over 400,000 units of demand in already-placed orders.

In our recent report after Tesla released Q2 deliveries however we brought our 2018 earnings numbers from $11.00 to $8.00 (See our earnings model here).

Our numbers went further below the street for this year as well. Previously we had not been worried about lower earnings numbers than the street for Tesla because the stock has proven to go up even on earnings misses (see here). A miss doesn't always mean a down stock for Tesla.

That said a drop in our earnings estimates, a delivery miss and a stock drop has us search for a realistic gameplan.


what do i do with tesla stock
Lets draw up a gameplan for Tesla stock.
We think we're right but we're going to let the market tell us we're wrong for now.

This is trading 101. We love wins, and we hate losses.  You need to hate losses. Losses build and wins build (unless something fundamentally changes, then get out).

Where do you invest in your business? Where you've been right not where you've been wrong.

Here we don't want losses. If the stock goes into loss territory we're gone.  We'll reassess at a later date if the Model 3 is confirmed and flows through.  Even if the stock is higher, if the news is confirmed it may be up but it could also be up from a lower level.

So we're holding on but if it opens or closes below $302, we're gone for now.

Tesla Stock Technicals

Chart By Interactive Brokers
Above you see where we made our bullish call on Tesla. If we close or open below the low of that day we are gone.

That is a good gameplan because it's simple and takes ego out of it.  If we're wrong, we're gone. No ego. It's very hard to trade without ego but it will help you make more money.

If Tesla were to break that horizontal line, we think there is more risk.

It already broke its uptrend as you see above.  We think that it needs to hold that $300 area.

Conclusion

Trading is about profits and losses. That's the reality. We're not sure the media realizes that. We do think Cramer of CNBC gets it frankly and has in mind your profits but we don't see it elsewhere. He may not have the best performance on earth but he has your profits in mind.

Getting news from the media doesn't help you unless you have your own game plan. We think the rest of the media has clicks, headlines and advertising in mind not your profits. Hey people need to make money but you probably want to hear from someone who has your profits in mind not "news" in mind.

The media jumps on good news on up days and bad news on down days. You need to have a game plan to decipher it all.  That's what we're trying to do here and Tesla is one real time example where, you're the boss, you need answers. Here you go boss. You have your gameplan.

By: Chaim Siegel, Elazar Advisors, LLC

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