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.