Previously today I sold my whole Tesla position, 198 shares. It´s less than four weeks since I released an article called “Tesla buy opportunity of the year?”. Has anything changed? No! Today we will explain why I sold all my Tesla share, my plan for a buyback, and the continuation for our Tesla trade.
My previous predictions
In my latest Tesla article, we called a drop down to 177$, pictured in the chart below. Just a couple of days after the publication of the article, Tesla hit my target. Today, less then four weeks later, it hit a high of 235$, giving us a return of more than 32%.
Below you will find three different analysis I have done, they all played out perfectly. Later I will give my predictions for the short and long term. In my latest Tesla article, we called a drop down to 177$, pictured in the chart below. Just a couple of days after the publication of the article, Tesla hit my target. Today, less then four weeks later, it hit a high of 235$, giving us a return of more than 32%
I still stand by my statement, and I genuinely believe Tesla can be one of the best-performing stocks in the not so distant future, as they have before. A bullish prediction like that requires Tesla to perform better. Tesla needs to deliver on its promises. One catalyzer for a bull run could be a profitable quarterly report. Tesla has shown incredible innovation, leadership, ability to raise cash, giving them a fan base of no like. They are also in an incredibly growing market, EW.
At the same time, they are burning through cash at an incredible rate, often miss deadlines, and in Musk own words “from production hell to logistical delivery hell.” Tesla seems to be one of those companies that either make it big or fail miserably, not much middle ground. This also gets reflected in the news. Where we often see heated debates between Tesla bulls and bears.
Point being I am not comfortable enough to hold Tesla shares blindfolded at this point. I can see them go both ways, at the end I am bullish, but for now, it looks more like a coin flip than an investment. Therefore, trading might be the most optimized play for Tesla. We here at CVI preach value investing as number one, and technical analysis as an excellent companion to find the right entries and exits in our favorite stocks.
Most likely scenario
Down below you will the most viable scenario. As you can see there is quite a strong resistance going from 380$ all the way down to 180$ (previous support). Tesla just recently hit our resistance and turned downwards. This is why I chose to sell at a profit. Next buy target would be the green box. In other words, I hope Tesla retests the strong 4-year support line, bounces before breaking out of resistance to continue the bull run. This will enable us, to increase our shares with around 20% before a possible bull run.
To add upon this scenario, we also see the RSI meeting resistance at the latest and fourth touch (pink box below). The 50 moving average also lines up perfectly with the resistance. Please read my article on MA for a more complex understanding. Here.
Now if my scenario does not play out, and the price breaks the resistance I will buy back my position. This leaves me with a loss of 1-2%. Compared to a gain of 20% more shares if it retests support. All in all the risk-reward ratio is in our favor. Long term my target for Tesla is a new all-time high, giving a return of around 100%. This prediction will only be fulfilled if Tesla manages to deliver on its promises. Once again it’s the fundamentals that will move the price. Remember, our job as traders are not to lay a plan, then hope for the best. It is to act accordingly based on new price data. Anything can happen.
As always, please don´t hesitate to leave questions as I will be responding.
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