30 January 2020

Tesla's Oh S#!t Move

"It seems that I have always been ahead of my time. I had to wait nineteen years before Niagara was harnessed by my system, fifteen years before the basic inventions for wireless which I gave to the world in 1893 were applied universally."
--Nikola Tesla
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Tesla #TSLA reported earnings last night...

The numbers were well received...

Tesla's stock price gapped higher this morning forming what I call an Oh S#!t Gap... and yes, that's a technical term😂.

What's actually happening? A number of things actually...  There was a bullish chart pattern (Bull Flag) that was just begging to resolve higher... 

Institutional owners were clearly happy with the results and the forward guidance (and likely bought more shares)...  

But the biggest propeller of the move higher?  Shorts covering their positions.  That's what happens when short sellers get stopped out of their positions as a stock moves higher.  Think of it as a buyer getting stopped out of a position when a stock he owns breaks down through the level he designated as his stop level... in reverse.

When a trader is stopped out of a short at all time highs for a given stock, it tends to be a dramatic move (because who wants to sell a stock as its breaking strongly through all time highs)...  Thus the trader is often caught screaming "Oh S#1t" as he tries to find enough shares to buy to cover his position.

I have no idea if that's the case here...  But it sure looks like there was some panic buying this morning.