Two Charts That Look the Same

by JDH on August 18, 2018

As you know, I have paid close attention recently to two things: TSLA – Tesla Inc. and gold.  They both have similar looking charts.

By way of review: I am of the view that, in the future, we will look back on Tesla with the same level of admiration we reserve for Enron.  I believe that Tesla is a big scam.  Yes, I know they have actually built cars, so it’s not all air, but they no longer have a technology advantage (if they ever did), and they have zero chance of ever turning a profit.  Their only salvation will be to continue raising money from hapless investors, and I assume the supply of suckers will eventually run out.

Two weeks ago Elon Musk engineered a brilliantly evil short squeeze by tweeting out “funding secured” for a Twitter-announced going private transaction at $420 per share.  It turns out that was a lie, and now the SEC is investigating.  Tesla’s stock was down almost 9% on Friday, closing at $305.50, which is the same level it was trading at in April, 2017.  So, as an investor, if you have held the stock for the last 15 months, you have made nothing.

$390 is the all time high, and the stock has tried three times in the last 15 months to break through that level, without success.  $400 would appear to be an un-achievable dream, at least until Uncle Elon comes up with an even more bizarre tweet to spike the market.

I will confess that I got burned before earnings by holding puts, that subsequently crash.  I was not playing with big money, but I was not happy about the loss.

This week I was much happier.

I bought the September 290 puts, expiring on September 21, for $9.30 on August 10, and sold them on Friday for $15.90.  That’s more like it.  Not one to quit while I’m ahead, I immediately bought the September $270 puts for $11.10.  I bought and sold the same number of puts, so my actual dollar investment has declined.  I’m not “letting it roll”.  I took most of the profit off the table, and we’ll just play with the original capital.  Why?  Because something crazy will likely happen next week, and I don’t want to lose everything.

My plan is to maintain a small put position until the inevitable crash, and hopefully cash in at that time.

Eventually the Tesla symbol will go from TSLA to TSLAQ (I’ll leave it to the reader to research what adding a Q to the end of a ticker symbol means).

Gold

The gold chart is equally pessimistic.

Gold is trading around$1,184, which is about where it traded in December 2013, briefly, and again occasionally in 2014, 2015 and 2016, and at the start of 2017.  That’s quite the consolidation phase.

Is this the bottom?

I have no idea, but I will say this: gold is historically volatile, but it is also a store of value with many thousands of years of history, so it would surprise me if it just ceased to exist.  I have stink bids in on the gold stocks I want to own, so I’m buying as it falls.  The consolidation (or crash) won’t last forever.

The RSI is now at 22.77, so a bounce from here is inevitable.

Two final thoughts:

The pot stocks have been under pressure, due to some delays in setting up a retail distribution network in Ontario.  No worries, it’s a great buying opportunity.  Canopy Growth (WEED.TO) bounced this week on word of a big investment, so this play is far from over.

Finally Amazon keeps rolling along, so I’ve bought 100 shares, and every week I’ll do a covered write against it to capture some option premium.  We’ll see how that works out.

That’s the plan.  Thanks for reading.  More next week.

Yes, I got killed on my Tesla short play.  I assumed that when they released horrifically bad results, the stock would tank.  I assumed that repeated customer complaints about crappy car quality would cause the stock to tank.

Apparently not.

All it took was a tweet from Elon Musk to “confirm” that financing was confirmed to take the company private at $420 per share.

Yup.  “Funding secured”.

Of course this is a lie.  Investor support comes in the form of cash.  What investor group has $70 billion to complete the largest “go private” transaction in corporate history?

None, apparently.  “All it takes is a shareholder vote” is a lie.  What you really need is $70 billion to buy a company that can’t make cars, and can’t make money.

It ain’t happening, folks.

But, as I have said before, imminent and inevitable are not the same, so this scam could continue for many more weeks or months.

Time will tell.

See you next week.

 

A Bad Week to be Short

August 4, 2018

Well, that did not play out as expected. Last week I was blathering on about how it was a good week to be short, because Facebook’s stock crashed, and Tesla’s was going down.  I don’t short Tesla, but I bought puts, which were a great speculation two weeks ago, but a horrible disaster this week. […]

Read the full article →

A Good Week to be Short

July 28, 2018

I’m not a short seller.  I’m an optimist, and being a short seller implies that you are a pessimist.  It’s bad karma.  I prefer to take an optimistic approach. Also, the most you can make shorting a stock, un-leveraged, is 100%.  If you short a stock at $100 and it goes to zero, you made […]

Read the full article →

Still Short on Tesla

July 21, 2018

Tesla has settled in the $313 range, ahead of the quarterly earnings report due at the beginning of August.  I assume the bulls will be able to find something positive in the earnings report, given that they built a tent and built a lot of cars in the last week of the quarter. But, there […]

Read the full article →

The Cash Accumulation Phase Begins

July 14, 2018

We are in the dog days of summer.  The weather is hot.  Everyone is on vacation.  Nothing much is happening. As I have previously predicted, TSLA – Tesla Inc. will eventually go bankrupt, but it hasn’t happened yet.  The next quarterly earnings announcement will be around August 1, so presumably we will get more insight […]

Read the full article →

Like I said last week…

July 7, 2018

Last week I said to buy gold and short Tesla.  That was good advice.  You’re welcome. I bought some Tesla puts on Monday, sold them on Tuesday (at a profit), and then took another position on Friday.  It’s not a big position, but enough for fun.  I bought the $300 strike price, expiring in September. […]

Read the full article →

Buy Gold and Short Tesla

June 30, 2018

It’s a long weekend here in Canada, and the weather is very hot, so since you don’t want to waste your time in front of a computer screen, I’ll be brief. The panic selling in gold appears to be over (for now), so on Friday I began to accumulate a small position in NUGT – […]

Read the full article →

Gold and Tesla are Going to Pot

June 23, 2018

Gold The two month carnage in gold continues.  From the quadruple top resistance level of around $1,360, gold has collapsed, and the next two stops appear to be $1,240 and $1,200. This is not a pretty picture. Why is this happening? I don’t know.  Could be the USD dollar, could be better places to put […]

Read the full article →

The Last Pop for Pot?

June 16, 2018

Bill C-45 will eventually become the Cannabis Act.  It was passed by the House of Commons (thanks to a Liberal majority government), and last week it was passed by the Senate, but with amendments.  The Liberals don’t like some of the amendments, so they have accepted some of the proposed amendments, rejected others and sent it […]

Read the full article →