Tesla: A reflection and a long hard look
Throughout the entire market boom since March, I have not put into any thought with regards to trading Tesla. With every move up, I would think about how this move would be unsustainable as compared to other companies with established businesses and nice trading opportunities. However, I feel that the S&P inclusion creates an opportunity for me to right my wrongs and get a nice swing trade in on Tesla up until the inclusion date. Here are the reasons:
1. While China's EV industry has been booming as of late, Tesla's model Y has been given the green light to sell in China, which might further increase Tesla's market share from 1.3% to maybe in the 2% ranges (rough guesstimate), and undercut China EV firms in an incredibly fragmented industry.
2. Historically, S&P inclusion entails that there will be a a huge buy prior to the inclusion, but prices end up plateauing for a while post-inclusion. This could be the buy-in opportunity for a swing trade.
3. On the matter of plateauing, I still do not think the current valuations support such a high price. Post S&P inclusion, they would have to actually produce outstanding results to continue pushing the stock up. Anything short of that might mean the price will move sideways into nowhere unless there is a catalyst of some sort. This would mean that any post-inclusion trades on TSLA might not yield as outstanding results as have hoped.
3. Funds that track the S&P will have to sell off some of their holdings to make way for Tesla. This would mean a broad minor selloff in some weaker S&P stocks, and strength in TSLA.
TSLA's S&P inclusion date is 21 Dec. While I feel that the current parabolic move is unsustainable, the bearish engulfing candlestick pattern indicates a short reversal, by which I think would be a good chance to enter a position pending market moves within this week. As always, the information provided are solely my own opinion, and does not constitute as investment advice. Please do your own due dilligence, and trade safe!
1. While China's EV industry has been booming as of late, Tesla's model Y has been given the green light to sell in China, which might further increase Tesla's market share from 1.3% to maybe in the 2% ranges (rough guesstimate), and undercut China EV firms in an incredibly fragmented industry.
2. Historically, S&P inclusion entails that there will be a a huge buy prior to the inclusion, but prices end up plateauing for a while post-inclusion. This could be the buy-in opportunity for a swing trade.
3. On the matter of plateauing, I still do not think the current valuations support such a high price. Post S&P inclusion, they would have to actually produce outstanding results to continue pushing the stock up. Anything short of that might mean the price will move sideways into nowhere unless there is a catalyst of some sort. This would mean that any post-inclusion trades on TSLA might not yield as outstanding results as have hoped.
3. Funds that track the S&P will have to sell off some of their holdings to make way for Tesla. This would mean a broad minor selloff in some weaker S&P stocks, and strength in TSLA.
TSLA's S&P inclusion date is 21 Dec. While I feel that the current parabolic move is unsustainable, the bearish engulfing candlestick pattern indicates a short reversal, by which I think would be a good chance to enter a position pending market moves within this week. As always, the information provided are solely my own opinion, and does not constitute as investment advice. Please do your own due dilligence, and trade safe!
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