Today we discuss pot stocks, and a stock that is going to pot: Tesla.
The chart seems clear to me. From a high of $370 in December, Tesla touched $270 this week. It does not take a charting expert to realize that a series of lower highs and lower lows is a down trend,
Technically the stock looks horrible, but fundamentally the story is even worse.
Tesla can’t build cars. The quality is horrible, and now they have announced that they are closing most of their stores, so if you want to buy a car you will have to buy it online. No test drive. Just buy it (but you have 10 days to return it if you don’t like it, so you are paying full price for a ten day test drive). The on-line model works fine for their fan-boys, who think Elon is doing God’s work, but they’ve all bought one of these lemons. All future growth has to come from the general public, and there is no way the average consumer will buy an over-priced lemon without even taking it for a test drive.
This stock is done. Here’s how I’m playing it:
I buy out of the money puts, and when they go up, I sell them, and buy a slightly cheaper put. For example:.
On March 1 I bought the April $270 puts for $11.80, and later that same day I sold them for $12.95. I then bought the April $260 puts for $10.40, and on March 4 I sold them for $12.80.
On March 5 I bought the May $200 puts for $9.75. Oops, the stock went up, so I bought more for $7.87 to average down my cost.
I am currently holding those puts that expire on May 17, 2019 with a $200 strike price. Why $200? No reason, other than I have a set budget, and I’ll start by buying 25% of my full allocation, and if they go up in a day or two, as happened at the beginning of the month, I sell them, and roll the money over. If they go down, I buy another 25% allocation.
I’m currently 50% allocated, so if Tesla goes up at the beginning of the week, I’ll buy more, and keep averaging down. As you can see from the chart, we are in a downtrend, so inevitably it will go lower.
I hope.
Pot Stocks
My favorite cannabis stock is TGOD.TO – The Green Organic Dutchman. I started buying in private placements before it went public, and watched it go all the way to $10 in September, but since I was subject to a hold period I couldn’t sell my restricted shares (I did sell some of my unrestricted shares). It then promptly crashed to $2.
However, since the start of the year it has more than doubled in value, and now sits at $4.26. I apologize for the crude drawing, but it looks like either a bottom formation or a cup with a handle pattern, which portends a much higher price.
At the moment I’m holding.
The prudent play would be to start selling as it goes higher, something like sell 20% of my shares at $5, 20% at $6, etc, but since I have nothing better to put my money in at the moment, I’m holding.
Gold is also looking good, after a short rough patch; I really like EQV.V – Equinox; more on that next week.
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3 Charts
by JDH on March 16, 2019
Let’s start with Tesla, shall we?
Tesla has strong support just above $240, and strong resistance at just under $390. So, the question is, which resistance level gets tested first? I’m betting it’s the lower one, and I will not be at all shocked if $240 is broken soon.
If Tesla made gas cars I would say they are leaking oil, but I guess that analogy does not work here.
Neither do their cars.
They made a show of introducing the Model X, which is essentially a PT Cruiser. The market laughed, and Tesla dropped 5%, the first time a new product announcement was treated with derision. They have no cash, and they have no factory in which to make this car, and they have closed many of their stores and laid off a big chunk of their workforce.
I’m holding puts, and will continue to do so.
Of more interest to me is TGOD.C – The Green Organic Dutchman, my favorite cannabis stock.
I bought it as a private placement prior to the IPO last year, so I am sitting on a profit. The stock got way ahead of itself, hitting $10, before crashing to $2. (My shares were restricted, so I couldn’t sell at the peak).
No worries, it has more than doubled since the start of the year. It would appear that we are in a consolidation phase now, but I expect that by the end of the spring it will break through $5, and when that happens $10 is the next target.
I’m holding.
Finally, our thoughts turn to gold.
I present for your edification a ten year chart.
We had a great run in 2010 and 2011, followed by a five year bear market.
That happens.
Since the low around $1,050 at the end of 2015 gold has been in a jerky consolidation phase, with $1,400 the next important target. I assume it will get there this year, but who knows, the consolidation could continue for a while. We shall see.
I’m holding, having added to my positions during periods of weakness.
My favorite gold holding is EQX.V – Equinox Gold Corp. It had a long correction period, but that’s over, so I expect to see $2 later this year.
We shall see.
Thanks for reading; more next week.