Update on Tesla and Pot Stocks

by JDH on March 9, 2019

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.